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May 17, 2026International Review of Finance2 citations

Greenness in the Eye of Bond Short Sellers

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JCJie CaoSLShuting LiXZXintong Zhan

Key Points

  • This research explores the relationship between short selling activities and the perceived value of green bonds compared to conventional bonds.
  • Analyzed shorting volumes of green bonds versus conventional bonds issued by the same firm.
  • Considered explanations such as market frictions and demand pressures for bonds.
  • Found significantly higher shorting volumes for green bonds relative to traditional bonds.
  • Identified a puzzle as existing explanations could not clarify the increased shorting volumes.

Abstract

ABSTRACT This paper examines how short sellers value “greenness” in trading corporate bonds. We document significantly higher shorting volumes for green bonds relative to conventional bonds issued by the same firm. We consider several potential explanations, including short‐sale constraints and lending market frictions, sources for future price declines, and demand pressure from investors. None of the above could explain the higher shorting volumes for green bonds, leaving an intriguing puzzle.

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Cite This Study

Cao et al. (2026) studied this question.

synapsesocial.com/papers/6a095c6d7880e6d24efe2891https://doi.org/10.1111/irfi.70077
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