The Good? The Bad? The Ugly? Which news drive (co)variation in Swiss and US bond and stock excess returns?

Thomas Nitschka

No 2014-01, Working Papers from Swiss National Bank

Abstract: Based on a vector autoregressive model, this paper shows that time variation in monthly excess returns on Swiss government bonds and stocks is predominantly driven by news of inflation and dividends, respectively. This finding is in marked contrast to US evidence which points to a more prominent role of excess return news in this respect. The bond market findings for both Switzerland and the US are consistent with the view that market participants put more weight on news of macroeconomic, i.e. long-term inflation, risks in periods of exceptionally low real interest rates and in crisis periods than in normal times.

Keywords: bond return; news components; stock return; variance decomposition (search for similar items in EconPapers)
JEL-codes: E44 G12 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2014
New Economics Papers: this item is included in nep-mac and nep-sog
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:snb:snbwpa:2014-01

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