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The Stock-Bond Comovements in the Paris Bourse: Historical Evidence

17 Pages Posted: 12 Oct 2011  

Amir Rezaee

Institut Supérieur de Gestion (ISG), Paris

David Le Bris

Toulouse Business School

Multiple version iconThere are 2 versions of this paper

Date Written: October 12, 2011

Abstract

Using some recently developed Paris Bourse 19th century price indexes; we study the stock-bond monthly return comovement for a 76 years long period. The comovements of stocks not only with government bonds, like majority of studies on this subject, but also with corporate bonds have been considered in this paper. A multivariate Dynamic conditional correlation GARCH(DCC GARCH) model has been implemented to assess the stock-bond return time varying correlation. The model succeeds to capture well enough the behavior of stocks and bonds returns. We do obtain variable but always highly positive conditional stock-bond correlations. The Granger causality tests which we have conducted per sub periods shows as we approach to the end of the 19th century the corporate bond market becomes more and more dominant in term of price adjustment and therefore more efficient.

Keywords: Stock-Bond Return Correlation, DCC GARCH Model, Cointegration, Causality

JEL Classification: G11, G14, N23

Suggested Citation

Rezaee, Amir and Le Bris, David, The Stock-Bond Comovements in the Paris Bourse: Historical Evidence (October 12, 2011). Paris December 2011 Finance Meeting EUROFIDAI - AFFI. Available at SSRN: https://ssrn.com/abstract=1942927 or http://dx.doi.org/10.2139/ssrn.1942927

Amir Rezaee (Contact Author)

Institut Supérieur de Gestion (ISG), Paris ( email )

Paris
France

David Le Bris

Toulouse Business School ( email )

20, bd Lascrosses
Toulouse, 31068
France

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