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    The pricing of green bonds: external reviews and shades of green
    (Springer, 2021)
    Dorfleitner, Gregor
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    ;
    Zhang, Rongxin
    We investigate the asset pricing implications of the greenness of bonds. To estimate a green-pricing effect, we determine the `green bond premium' as the difference between the yields of matched conventional and green-labeled bonds. On a cross-sectional average, green bonds experience a statistically significant positive premium. This premium increases with external greenness evaluations, i.e., investors accept premiums of up to 5 basis points for bonds with a substantial environmental agenda. This external validation effect, which is strongest for bonds that are rated dark-green, may offset not incurring information costs, as this effect decreases with increasing age of bonds.
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