Realized Bond-Stock Correlation: Macroeconomic Announcement Effects
31 Pages Posted: 10 Mar 2006
Date Written: October 26, 2005
We investigate the effects of macroeconomic announcements on the realized correlation between bond and stock returns. Our results deliver insights into the dominating drivers of bond-stock comovements. We find that it is not so much the surprise component of the announcement, but the mere fact that an announcement occurs that influences the realized bond-stock correlation. The impact of macroeconomic announcements varies across the business cycle. Announcement effects are highly dependent on the sign of the realized bond-stock correlation which has recently gone from positive to negative. Macroeconomic announcement effects on realized bond and stock volatilities are also investigated.
Keywords: Bond-stock correlation, Macroeconomic announcements, Realized correlation, Realized volatility
JEL Classification: G12, G13, G14
Suggested Citation: Suggested Citation