What Wavelet-Based Quantiles Can Suggest about the Stocks-Bond Interaction in the Emerging East Asian Economies?
Jovan Njegic (),
Milica Stankovic () and
Dejan Živkov ()
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Jovan Njegic: Novi Sad Business School, Serbia
Milica Stankovic: College of Applied Professional Studies, Vranje, Serbia
Czech Journal of Economics and Finance (Finance a uver), 2019, vol. 69, issue 1, 95-119
This paper investigates bidirectional interdependence between 10Y bond yields and stock returns in the eight emerging East Asian economies. The method of choice is wavelet-based quantile approach, which can provide an answer about spillover effect in different market conditions and in different time horizons. We find that shock spillover effect is much more intense from the bond markets to the stock markets in all the selected economies, than vice-versa. Also, the nexus is dominantly positive in the more developed financial markets in both tranquil and crisis periods, particularly in the short and midterm horizons, which is an indication that capital reallocation takes place between these markets in a search for safer and more profitable investments. As for the less developed East Asian economies, we find negative quantile parameters in all quantiles and in all wavelet scales, which suggests that dividend discount model is a decisive factor that drives the stock-bond interdependence in all time horizons.
Keywords: 10Y bond yields; stock returns; wavelet decomposition; quantile regression (search for similar items in EconPapers)
JEL-codes: C22 C63 G12 G15 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:69:y:2019:i:1:p:95-119
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