Determinants of stock-bond market comovement in the Eurozone under model uncertainty

Vasiliki Skintzi

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines the dynamic relationship between stock and bond returns in eleven Eurozone countries during the last seventeen years. The literature so far reports heterogeneous results with respect to the important determinants of the stock-bond relationship. To deal with model uncertainty we employ a Bayesian model averaging technique and examine various macroeconomic and financial variables which are likely to influence stock-bond comovement. Bond and stock market uncertainty, interest rate, inflation and state of the economy are important determinants of cross-asset correlations. Divergence in the dynamic patterns of stock-bond comovement as well as on the effect of economic variables on this comovement is reported during crisis periods and between different European regions. Our results are of high relevance for investment strategies as well as for policy decisions in the European context.

Keywords: stock-bond correlation; Bayesian Model Averaging; financial crisis (search for similar items in EconPapers)
JEL-codes: C11 C58 E44 G15 (search for similar items in EconPapers)
Date: 2017-04-13
New Economics Papers: this item is included in nep-eec and nep-mac
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Determinants of stock-bond market comovement in the Eurozone under model uncertainty (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:78278

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