Volatility Estimation of Rate of Return of ESG Bonds in Thailand

Abstract

 The objectives of the study were to create a model for estimating the sustainable
return rates of Environmental, Social, and Governance (ESG) Bonds from the regression
variables, and to analyze the characteristics of the variability of return rates for sustainable
debt securities in Thailand. The study utilized a daily time series dataset of return rates for
sustainable debt securities, comprising 877 observations from January 5th, 2021 to June 4th,
2023.
The study results revealed that the appropriate models for estimating the sustainable
return rates of different types of debt securities, including government bonds, state enterprise
bonds, and corporate debentures, were respectively the ARIMA(1,1,0), ARIMA(1,1,2), and
ARIMA(1,1,3) models. Additionally, through the analysis of the volatility characteristics of return
rates for sustainable debt securities, it was found that government bond securities exhibit
constant volatility, whereas state enterprise bond securities and corporate debentures showed
non-constant volatility. The volatility patterns aligned with the GARCH(2,2) and ARCH(2)
models, respectively.