Is Corporate Bond Market Performance Connected with Stock Market Performance?

Hayette Gatfaoui

Post-Print from HAL

Abstract: Stock markets and bond markets are known to interact. Specifically, the common stock market trend (i.e., business cycle also termed market/ systematic risk) impacts the common corporate bond market trend (i.e.,credit cycle). First, we disentangle the common latent component from total stock returns, namely the common systematic/unobserved stock market component. Second, we extract the common latent component from total bond returns, namely the common unobserved/systematic corporate bond component.Then, we estimate the dynamic relationship between systematic total stock returns and systematic total bond returns over time (i.e., co- and antimonotonicity risk). We characterize therefore the time-varying correlation risk (i.e., correlation risk structure) between stock performance and corporate bond performance. Results are instructive in a dynamic risk management prospect with regard to equity- and corporate bond-based portfolios. . .

Keywords: Corporate bonds; flexible least squares; Kalman filter; latent Factor; systematic risk; total return (search for similar items in EconPapers)
Date: 2009-09-01
References: Add references at CitEc
Citations:

Published in Bankers Markets & Investors : an academic & professional review, 2009, n° 102, pp.46-59

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:hal:journl:hal-00565492

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().