ON THE RELATIONSHIP BETWEEN THE DANISH STOCK AND BOND MARKET IN THE MEDIUM AND LONG TERM

Jan Overgaard Olesen and Ole Risager
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Jan Overgaard Olesen: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Ole Risager: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark

No 04-2000, Working Papers from Copenhagen Business School, Department of Economics

Abstract: This short paper studies the empirical relationship between realized stock returns and bond

yields at the 5- and 10-year investment horizons, respectively. Using annual Danish data since

1927, we find that stock returns and bond yields are closely linked in the medium and long

term, as we estimate strong cointegrating relations at both horizons. Hence, at the 5- and 10-

year investment horizons a high bond yield tends to go hand in hand with a high stock return,

and vice versa. Results show that stock returns tend to respond less than one-to-one to

changes in the bond yield.

Keywords: stock returns; Bond yields; Denmark (search for similar items in EconPapers)
JEL-codes: E40 G10 G30 H10 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2000-02-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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