A Century of Stock-Bond Correlations

Ewan Rankin and Muhummed Shah Idil
Additional contact information
Ewan Rankin: Reserve Bank of Australia
Muhummed Shah Idil: Reserve Bank of Australia

RBA Bulletin (Print copy discontinued), 2014, 67-74

Abstract: The correlation between movements in equity prices and bond yields is an important input for portfolio asset allocation decisions. Throughout much of the 20th century, the correlation between equity prices and government bond yields in the United States and other countries, including Australia, fluctuated but tended to be negative. However, stock-bond yield correlations have been largely positive since the late 1990s, rose strongly during the global financial crisis and have since remained at a high level for a prolonged period. The more recent period of positive correlation in part reflects the pronounced and persistent effect of the financial crisis on the economic outlook, though it may also owe in part to an increase in the importance of uncertainty about real economic activity in driving both government bond yields and stock prices. Changes in US monetary policy look to have exerted an opposing force on the correlation at times, driving it lower.

Keywords: Equity prices; bond yields; US Treasuries; S&P 500; correlations; asset prices; risk-on risk-off; stock-bond correlation; portfolio theory; US; United States; Japan; Australia; United Kingdom; UK (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://www.rba.gov.au/publications/bulletin/2014/sep/pdf/bu-0914-8.pdf (application/pdf)

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:rba:rbabul:sep2014-08

Access Statistics for this article

RBA Bulletin (Print copy discontinued) is currently edited by Luci Ellis

More articles in RBA Bulletin (Print copy discontinued) from Reserve Bank of Australia Contact information at EDIRC.
Bibliographic data for series maintained by Paula Drew ().