International Stock-Bond Correlations in a Simple Affine Asset Pricing Model

Stefano d'Addona and Axel H. Kind
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Axel H. Kind: University of St. Gallen - Swiss Institute of Banking & Finance

Finance from EconWPA

Abstract: In this paper we use an affine asset pricing model to jointly value stocks and bonds. This enables us to derive endogenous correlations and to explain how economic fundamentals influence the correlation between stock and bond returns. The presented model is implemented for G7 post- war economies and its in-sample and out-of-sample performance is assessed by comparing the correlations generated by the model with conventional statistical measures. The affine framework developed in this paper is found to generate stock-bond correlations that are in line with empirically observed figures

Keywords: Affine Pricing Models; Stock-Bond Correlations; G-7 Countries (search for similar items in EconPapers)
JEL-codes: F30 G12 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin
Date: 2005-02-23
Note: Type of Document - pdf; pages: 53
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http://129.3.20.41/eps/fin/papers/0502/0502018.pdf (application/pdf)

Related works:
Journal Article: International stock-bond correlations in a simple affine asset pricing model (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpfi:0502018

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