Download This PaperAnomaly in Stock-Bond Correlations: The Role of Monetary Policy
25 Pages Posted: 19 Dec 2015
Date Written: December 16, 2015
Abstract
The paper estimates constant conditional correlation (CCC) GARCH models to test whether the dramatic changes in stock-bond market correlations can be explained by monetary policy variables such as OIS interest rate shocks or volatility regimes. We find that both specifications are empirically relevant: Correlations decrease after positive monetary shocks (decreasing rates) as well as in times with large central bank activity (high rate volatility regimes).
Keywords: bond-stock correlation, GARCH models, monetary policy
JEL Classification: G15, E44
Suggested Citation: Suggested Citation
Gusset, Jonas and Zimmermann, Heinz, Anomaly in Stock-Bond Correlations: The Role of Monetary Policy (December 16, 2015). Available at SSRN: https://ssrn.com/abstract=2704529 or http://dx.doi.org/10.2139/ssrn.2704529
Do you have a job opening that you would like to promote on SSRN?
Feedback
Feedback to SSRN