News implied volatility and the stock-bond nexus: Evidence from historical data for the USA and the UK markets
Rangan Gupta (),
Stephanos Papadamou () and
Mark Wohar ()
Journal of Multinational Financial Management, 2018, vol. 47-48, 76-90
Using monthly stock and bond returns data from both the USA and the UK, this study addresses the issue of whether news implied volatility and its main components have affected in any significant manner the time-varying stock–bond covariance, their returns and their variances. The time varying association between the two markets has attracted considerable attention due to its important implications for asset allocation, portfolio selection and risk management. The issue at hand is addressed using a VAR(p)-BEKK-GARCH(1,1)-in-mean model and the results reported herein indicate that different types of news implied volatility as quantified by the NVIX developed by Manela and Moreira (2017) affect differently USA and UK returns, variances and covariance.
Keywords: NVIX index; Stock-bond covariance; GARCH models (search for similar items in EconPapers)
JEL-codes: E44 G10 G15 (search for similar items in EconPapers)
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Working Paper: News Implied Volatility and the Stock-Bond Nexus: Evidence from Historical Data for the USA and the UK Markets (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mulfin:v:47-48:y:2018:i::p:76-90
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