Dynamic stock–bond return correlations and financial market uncertainty
Thomas Chiang (),
Jiandong Li () and
Sheng-Yung Yang ()
Review of Quantitative Finance and Accounting, 2015, vol. 45, issue 1, 59-88
This paper investigates the dynamic correlations of stock–bond returns for six advanced markets. Statistics suggest that stock–bond relations are time-varying and display smooth transitional changes. The stock–bond correlations are negatively correlated with stock market uncertainty as measured by the conditional variance and the implied volatility of the S&P 500 index. However, stock–bond relations are positively related to bond market uncertainty as measured by the conditional variance of bond returns. The evidence also shows that stock–bond correlations are significantly influenced by default risk and the London interbank offered rate–T-bill rate spread in the crisis period. Copyright Springer Science+Business Media New York 2015
Keywords: Stock–bond correlation; Volatility; ADCC model; VIX; Default risk; C12; C13; G10; G11 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:rqfnac:v:45:y:2015:i:1:p:59-88
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