Dynamic correlations of bond and equity futures and macroeconomic determinants: international evidence

Nikiforos Laopodis, Theophano Patra and Vassilis Thomas

International Journal of Financial Markets and Derivatives, 2023, vol. 9, issue 1/2, 114-135

Abstract: This paper examines whether the dynamic co-movements between stock-bond futures markets may be driven by domestic and international macroeconomic factors. The empirical analysis also investigates whether economic uncertainty and geopolitical risks have an impact on the dynamic conditional correlations of bond and equity futures markets. The results pointed to significance of domestic inflation and industrial production, while the 3M USD Libor and 3M Euribor surfaced as determinants of the dynamic equity-bond futures correlations. Finally, the paper examines the impact of the pandemic on the dynamic correlations with the split of the sample in pre- and post-pandemic periods and it was found that neither the uncertainty nor the geopolitical risk indices emerged as statistically significant in any country.

Keywords: bond-equity futures; DCC-GARCH; macroeconomic variables; economic uncertainty indices; geopolitical risk. (search for similar items in EconPapers)
Date: 2023
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