Realized Bond-Stock Correlation: Macroeconomic Announcement Effects
University of Aarhus - School of Economics and Management - CREATES
University of St. Gallen
October 26, 2005
We investigate the effects of macroeconomic announcements on the realized correlation between bond and stock returns. Our results deliver insights into the dominating drivers of bond-stock comovements. We find that it is not so much the surprise component of the announcement, but the mere fact that an announcement occurs that influences the realized bond-stock correlation. The impact of macroeconomic announcements varies across the business cycle. Announcement effects are highly dependent on the sign of the realized bond-stock correlation which has recently gone from positive to negative. Macroeconomic announcement effects on realized bond and stock volatilities are also investigated.
Number of Pages in PDF File: 31
Keywords: Bond-stock correlation, Macroeconomic announcements, Realized correlation, Realized volatility
JEL Classification: G12, G13, G14working papers series
Date posted: March 10, 2006
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