Asset Co-Movements: Features and Challenges

27 Pages Posted: 3 Jan 2018

Date Written: 2017-11-01

Abstract

This paper documents and characterizes the time-varying structure of U.S. and international asset co-movements. Although some of the time variation could be genuine, the sampling uncertainty and time series properties of the series can distort significantly the underlying signal dynamics. We discuss examples that illustrate the pitfalls from drawing conclusions from local trends of asset prices. On a more constructive side, we find that the U.S. main asset classes and major international stock indices share a factor that is closely related to the business cycle. At even lower frequency, the common asset co-movement appears to be driven by demographic trends.

Keywords: cross-asset, within-asset and international asset co-movements, rolling correlation, time-variability, persistence, higher moments, risk factors, sampling frequency

JEL Classification: G13, G14, G17

Suggested Citation

Gospodinov, Nikolay, Asset Co-Movements: Features and Challenges (2017-11-01). FRB Atlanta Working Paper No. 2017-11. Available at SSRN: https://ssrn.com/abstract=3092152

Nikolay Gospodinov (Contact Author)

Federal Reserve Bank of Atlanta ( email )

Atlanta, GA 30309
United States

HOME PAGE: https://www.frbatlanta.org/research/economists/gospodinov-nikolay.aspx?panel=1

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