Macroeconomic News and Stock–Bond Comovement*

Greg Duffee

Review of Finance, 2023, vol. 27, issue 5, 1859-1882

Abstract: Covariances between aggregate stock returns and changes in bond yields change sign over time. Existing theories emphasize either time-varying properties of expected inflation or time-varying properties of real yields. Using revisions in survey forecasts as proxies for macroeconomic news, neither approach succeeds empirically. Inflation-centric models require much more news about expected future inflation than we observe from surveys. Real-centric models posit signs of covariances among macroeconomic news, changes in yields, and stock returns that do not match those in the data. In a nutshell, macroeconomic news appears to drive a substantial part of stock–bond comovement, but not in ways consistent with our theories.

Keywords: Stock returns; bond yields; stock–bond covariance; determinants of interest rates (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1093/rof/rfac066 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:revfin:v:27:y:2023:i:5:p:1859-1882.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Review of Finance is currently edited by Marcin Kacperczyk

More articles in Review of Finance from European Finance Association Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().