Trends in stock-bond correlations

Harumi Ohmi, Tatsuyoshi Okimoto

研究成果: Article査読

13 被引用数 (Scopus)

抄録

Previous studies document the existence of long-run trends in comovements in the stock and bond markets. Following these findings, this article examines possible trends in stock-bond return correlations. To this end, we introduce a trend component into a smooth transition regression (STR) model including the multiple transition variables of Aslanidis and Christiansen (2012). The results indicate the existence of significant decreasing trends in stock-bond correlations for many advanced safer countries. In addition, although stock market volatility continues to be an important factor in stock-bond correlations, the short rate and yield spread become only marginally significant once we introduce the trend component. Our out-of-sample analysis also demonstrates that the STR model, including the volatility index and time trend as the transition variables, dominates other models. Furthermore, we find a significant increase in stock-bond correlations for riskier euro countries around the beginning of the euro crisis. Our findings of decreasing and increasing trends in stock-bond correlations can be considered a consequence of the decreasing effects of diversification and more intensive flight-to-quality behaviour that have taken place in recent years and after the euro crisis.

本文言語English
ページ(範囲)536-552
ページ数17
ジャーナルApplied Economics
48
6
DOI
出版ステータスPublished - 2016 2月 1
外部発表はい

ASJC Scopus subject areas

  • 経済学、計量経済学

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