Buy the Rumor - Sell the News? A study on Swedish corporate green bond announcements

Abstract: The utilization of corporate green bonds as a means of financing that promotes sustainable practices and environmentally-conscious investments has grown in its scope across the world. By issuing green bonds, firms commit to future contractual obligations while simultaneously communicating a dedication to sustainable growth. The study examines how the market reacts to the issuance of green bonds by publicly traded Swedish corporations. From a sample of 144 observations from 44 different corporations, we calculate and analyze abnormal returns on the market during a set of event windows surrounding the event date. The results indicate that there is a positive, statistically insignificant, cumulative abnormal return of 0.11% for the main event window, [-2, 2]. In addition, our findings for the interval [-12, 12] indicate an upward trend in abnormal returns that reverses as of day 2 for which the buy the rumor, sell the news trading strategy is presented as a possible explanation.