Stock-bond co-movements and cross-country linkages

Dirk Baur ()

International Journal of Banking, Accounting and Finance, 2010, vol. 2, issue 2, 111-129

Abstract: This study analyses the correlation of stock and bond indices for eight developed countries. We compare a country's stock-bond linkages with cross-country linkages and find that the former exhibit a negative trend in contrast to the positive trend observed for cross-country stock market and bond market linkages. We show that the decline of the stock-bond correlation in recent years can be explained with a more frequent portfolio rebalancing of investors due to the globalisation of securities markets and implied lower international diversification benefits across similar asset classes. A test for temporal commonalities of changes in cross-country and stock-bond linkages indicates that flight-to-quality from stocks to bonds and cross-country stock market contagion occurs simultaneously.

Keywords: stock market co-movements; bond market co-movements; stock-bond co-movements; flight-to-quality; market contagion; stock markets; bond markets. (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (9)

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Working Paper: Stock-bond co-movements and cross-country linkages (2007)
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