Comovement and Predictability Relationships Between Bonds and the Cross-section of Stocks
Malcolm Baker and
Jeffrey Wurgler
The Review of Asset Pricing Studies, 2012, vol. 2, issue 1, 57-87
Abstract:
Government bonds comove more strongly with bond-like stocks: stocks of large, mature, low-volatility, profitable, dividend-paying firms that are neither high growth nor distressed. Variables that are derived from the yield curve that are already known to predict returns on bonds also predict returns on bond-like stocks; investor sentiment, a predictor of the cross-section of stock returns, also predicts excess bond returns. These relationships remain in place even when bonds and stocks become “decoupled” at the index level. They are driven by a combination of effects including correlations between real cash flows on bonds and bond-like stocks, correlations between their risk-based return premia, and periodic flights to quality.
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (58)
Downloads: (external link)
http://hdl.handle.net/10.1093/rapstu/ras002 (application/pdf)
Access to full text is restricted to subscribers.
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:oup:rasset:v:2:y:2012:i:1:p:57-87.
Access Statistics for this article
The Review of Asset Pricing Studies is currently edited by Zhiguo He
More articles in The Review of Asset Pricing Studies from Society for Financial Studies
Bibliographic data for series maintained by Oxford University Press (joanna.bergh@oup.com).