Risk and Policy Uncertainty on Stock–Bond Return Correlations: Evidence from the US Markets
Thomas C. Chiang ()
Additional contact information
Thomas C. Chiang: Department of Finance, LeBow College of Business, Drexel University, Philadelphia, PA 19104, USA
Risks, 2020, vol. 8, issue 2, 1-17
This paper investigates dynamic correlations of stock–bond returns for different stock indices and bond maturities. Evidence in the US shows that stock–bond relations are time-varying and display a negative trend. The stock–bond correlations are negatively correlated with implied volatilities in stock and bond markets. Tests show that stock–bond relations are positively correlated with economic policy uncertainty, however, are negatively correlated with the monetary policy and fiscal policy uncertainties. Correlation coefficients between stock and bond returns are positively related to total policy uncertainty for returns of the Dow-Jones Industrial Average (DJIA) and the S&P 500 Value stock index (VALUE), but negatively correlated with returns of S&P500 (Total market), the NASDAQ Composite Index (NASDAQ), and the RUSSELL 2000 (RUSSELL).
Keywords: stock–bond correlation; VIX; economic policy uncertainty; monetary policy uncertainty; fiscal policy uncertainty (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
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:gam:jrisks:v:8:y:2020:i:2:p:58-:d:365898
Access Statistics for this article
Risks is currently edited by Prof. Dr. J. David Cummins
More articles in Risks from MDPI, Open Access Journal
Bibliographic data for series maintained by XML Conversion Team ().