Effectiveness of Green Bonds in Selected CEE Countries: Analysis of Similarities

Abstract

Green bonds are an increasingly important area not only in the financing of investments important to the environment, but recently also as an object of investment. From the investors point of view, the key aspect still remains the efficiency of the investment and its profitability. The subject of this research is to evaluate changes in the efficiency of green bonds issued in the selected CEE countries (Poland, Slovakia, Czech Republic, and Hungary), in the short and long term. Poland is the largest issuer of green bonds in this group, followed by the Czech Republic, Hungary, and Slovakia. Individual green bonds in these group of countries are characterized by varying levels of green bond yields, duration of the investment, issue size and counterparty risk. These factors greatly hinder their comparability, especially in terms of investment efficiency. This manuscript fits into this area, as the main purpose of the manuscript is to show similarities in the yields of green bonds issued in Poland and green bonds issued in CEE countries. The hypothesis that will be tested is that changes in the effectiveness of green bonds issued in Poland are strongly correlated with changes in the effectiveness of green bonds issued in CEE countries. The results of the research positively verified the hypothesis, and the objectives of the research were achieved. It was shown that green bonds issued in the Czech Republic and Slovakia demonstrate a high similarity in terms of effectiveness to green bonds issued in Poland. At the same time, the results confirmed that of all the bonds analysed, the one bond issued by the Hungarian government is the least related to green bonds issued in Poland in terms of effectiveness for investors. The study used multiresolution analysis and Dynamic Time Warping. The Dynamic Time Warping algorithm measures the similarity between two sequences that can change over time. The analysis was carried out over a wide temporal cross-section, analysing the similarity between the effectiveness in both the short and long term.