Interest rate changes and stock returns: A European multi-country study with wavelets
Vicente J. Bolós and
International Review of Economics & Finance, 2016, vol. 44, issue C, 1-12
This paper investigates the linkage between changes in 10-year government bond yields and stock returns for the major European countries in the time-frequency domain by using a number of cross-wavelet tools in the framework of the continuous wavelet transform, mainly the wavelet coherence and phase-difference. The results reveal that the degree of connection between 10-year bond rate movements and stock returns differs considerably among countries and also varies over time and depending on the time horizon considered. In particular, the UK shows the greatest interdependence between long-term interest rates and equity returns across time and frequencies, while the relationship is much weaker for several peripheral European countries such as Portugal, Ireland and Greece. The highest level of connection is observed for most countries since the onset of the recent global financial crisis. In addition, the significant linkage is mainly concentrated at investment horizons from one to 2years.
Keywords: Interest rates; Stock returns; Wavelets; Wavelet coherence; Phase-difference (search for similar items in EconPapers)
JEL-codes: C40 E44 F30 G15 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:44:y:2016:i:c:p:1-12
Access Statistics for this article
International Review of Economics & Finance is currently edited by H. Beladi and C. Chen
More articles in International Review of Economics & Finance from Elsevier
Series data maintained by Dana Niculescu ().