Government Bonds and the Cross-Section of Stock Returns
42 Pages Posted: 22 Mar 2009
There are 9 versions of this paper
Government Bonds and the Cross-Section of Stock Returns
Comovement and Predictability Relationships between Bonds and the Cross-Section of Stocks
Comovement and Predictability Relationships between Bonds and the Cross-Section of Stocks
Comovement and Predictability Relationships between Bonds and the Cross-Section of Stocks
Government Bonds and the Cross-Section of Stock Returns
Comovement and Predictability Relationships between Bonds and the Cross-Section of Stocks
Comovement and Predictability Relationships between Bonds and Thecross-Section of Stocks
Comovement and Predictability Relationships between Bonds and the Cross-Section of Stocks
Government Bonds and the Cross-Section of Stock Returnsâæ
Date Written: March 18, 2009
Abstract
We study basic return comovement and predictability patterns in U.S. government bonds and the cross-section of stocks. Government bonds comove most strongly with bond-like stocks, i.e. stocks of large, mature, low-volatility, profitable, dividend-paying firms that are neither high growth nor distressed. Government bonds and bond-like stocks are also copredictable in the sense that time-series variables that predict returns on one asset class also predict returns on the other. In addition to traditional explanations for comovement and copredictability, the evidence is particularly consistent with the hypothesis that fluctuations in investor sentiment affect the demand for both bonds and bond-like stocks relative to the demand for speculative stocks.
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