The Co-Movement Puzzle

79 Pages Posted: 15 Dec 2018 Last revised: 3 Jul 2022

See all articles by Dmitry Kuvshinov

Dmitry Kuvshinov

Universitat Pompeu Fabra; Barcelona School of Economics

Date Written: June 28, 2022


This paper studies the co-movement between discount rates on housing, equity, and corporate bonds. Most theories in macro-finance imply strongly positive co-movement, attributable to time variation in a cross-asset discount factor. I show that in the data, this co-movement is absent. Across 17 advanced economies and 150 years, asset-specific discount rates are uncorrelated, and asset valuations predict returns on individual asset classes, but not across asset classes. Such asset-specific discount rate movements are unlikely to be driven by cross-asset factors related to risk aversion and macroeconomic risk, but I provide evidence linking them to capital flows and subjective investor expectations.

Keywords: discount rates, risk premia, return predictability, excess volatility, discount rate co-movement

JEL Classification: G12, G15, G17, E44, N20

Suggested Citation

Kuvshinov, Dmitry, The Co-Movement Puzzle (June 28, 2022). Proceedings of Paris December 2021 Finance Meeting EUROFIDAI - ESSEC, Available at SSRN: or

Dmitry Kuvshinov (Contact Author)

Universitat Pompeu Fabra ( email )

Ramon Trias Fargas, 25-27
Barcelona, E-08005

Barcelona School of Economics ( email )

Carrer de Ramon Trias Fargas, 25-27
Barcelona, 08005

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