Paper Title
ARE SUSTAINABLE ASSETS MORE SHOCK-RESILIENT IN THE U.S. MARKET? A DUAL APPROACH USING EVENT STUDY AND VARIANCE DECOMPOSITION

Abstract
This paper explores the stability and resilience of four key asset classes - green bonds, ESG equities, conventional bonds, and conventional equities to major economic and geopolitical disruptions. The analysis is based on a hybrid event-study and variance-decomposition framework which discusses four types of shocks: market, geopolitical, financial, and sovereign. The dates of events are set as the moments when each shock may have noticeable impact on U.S. financial markets so that the alterations in the relationship between prices are taken into consideration. The estimation of abnormal returns is using the risk-adjusted market-model method with an event window (-30, +7) which enables the study to trace the pre-shock behaviour, impacts-day behaviour and short-run post-shock behaviour. The empirical findings indicate that sustainable asset classes have high shock-absorption capacity and quicker recession compared to the conventional ones. The highest abnormal-return deviations and the fastest mean reversion are indicated by green bonds, which explains their strong safe-haven properties. ESG equities also out-perform the traditional equities though they are relatively more volatile than green bonds. Traditional equities, by contrast, have the highest abnormal returns which are negative when dealing with any type of shock, as they are the most sensitive to earnings expectations, liquidity conditions, and investor sentiment. These results are supported by the results of variance-decomposition, which show that shock-related innovations are found to account a smaller fraction of future return variance to sustainable assets, and more persistence in the effect of shocks in traditional markets. These trends can be explained by the high institutional demand of sustainable instruments, greater disclosure and governance requirements in ESG-oriented companies, and the investment-grade and project-based issuance of green bonds. In general, the research paper has contributed to the body of work on sustainable finance by offering comparative evidence of resilience in the different types of assets and by shedding light on the mechanisms behind safe-havens behaviour in times of turmoil. The policy implications are apparent: the effective sustainability-oriented regulatory frameworks can be used to improve financial stability and promote the environmental goals. To investors, the findings highlight the importance of using assets with sustainability attributes to enhance portfolio resiliency. The aggregate of the findings refers to the increased significance of sustainable assets in a period of frequent shocks and structural lack of clarity. JEL Classification: G11 (Portfolio Choice; Investment Decisions), G14 (Information and Market Efficiency; Event Studies), G15 (International Financial Markets), Q56 (Environmental Economics: Sustainability; Environmental Policy) Keywords: Sustainable Finance, Event Study, Green Bonds, Shock Resilience