Presidential cycles and time-varying bond–stock market correlations: Evidence from more than two centuries of data
Riza Demirer () and
Rangan Gupta ()
Economics Letters, 2018, vol. 167, issue C, 36-39
Utilizing a DCC-GARCH model to capture time-varying correlations, we show that Democratic administrations are generally associated with lower degree of co-movement between the stock and government bond returns. The findings are in line with the documented presidential cycle effect on stock market returns and corroborate recent evidence that, when risk aversion is high, agents tend to elect the Democratic Party.
Keywords: Conditional correlation; GARCH; Bond and stock returns comovement; US presidential cycles (search for similar items in EconPapers)
JEL-codes: C22 C32 D72 G10 G12 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:167:y:2018:i:c:p:36-39
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