Tail connectedness among green bonds, Bitcoin, market uncertainty, and geopolitical risk

Abstract

This study examines whether connectedness among green bond returns, Bitcoin returns, market uncertainty, and geopolitical risk differs systematically across market states. Using a Quantile Vector Autoregression (QVAR) framework, we estimate connectedness across lower-tail, median, and upper-tail market conditions. To assess statistical reliability, we report bootstrap confidence intervals and difference-based tests and benchmark the quantile estimates against a conventional mean-based VAR. The mean-based benchmark closely matches connectedness around the median quantile. By contrast, system-wide connectedness is significantly stronger in both tails than around the median, as confirmed by difference-bootstrap tests. The direct green bond – Bitcoin linkage is stronger in the lower tail than under normal market conditions, although its net direction is not robustly identified across quantiles. Directional spillovers suggest a more prominent transmitting role for market uncertainty around the median and for geopolitical risk in the upper tail, although these differences should be interpreted cautiously. Overall, the findings indicate that conventional mean-based analysis adequately characterizes connectedness under normal market conditions but cannot capture the pronounced intensification of connectedness observed in the tails.