The role of central bank communication in the long-term stock-bond correlations: Evidence from China

Yanning Wang and Xichen Wang

Finance Research Letters, 2024, vol. 67, issue PB

Abstract: In this paper, we extend the traditional DCC-MIDAS-X model by incorporating the central bank communication sentiment indicator to examine its effect on the long-term correlations between stock and bond returns. Our results show that positive central bank communication can reduce stock-bond correlation. The effect changes over time depending on the state of the economy, which is significant during upturns but not noticeable during recessions.

Keywords: Central bank communication; Stock-bond correlation; Textual analysis; DCC-MIDAS-X (search for similar items in EconPapers)
JEL-codes: E44 E52 E58 G10 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:67:y:2024:i:pb:s1544612324009231

DOI: 10.1016/j.frl.2024.105893

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