Risk and Policy Uncertainty on Stock–Bond Return Correlations: Evidence from the US Markets

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ID: 110752
2020
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Abstract
This paper investigates dynamic correlations of stock–bond returns for different stock indices and bond maturities. Evidence in the US shows that stock–bond relations are time-varying and display a negative trend. The stock–bond correlations are negatively correlated with implied volatilities in stock and bond markets. Tests show that stock–bond relations are positively correlated with economic policy uncertainty, however, are negatively correlated with the monetary policy and fiscal policy uncertainties. Correlation coefficients between stock and bond returns are positively related to total policy uncertainty for returns of the Dow-Jones Industrial Average (DJIA) and the S&P 500 Value stock index (VALUE), but negatively correlated with returns of S&P500 (Total market), the NASDAQ Composite Index (NASDAQ), and the RUSSELL 2000 (RUSSELL).
Reference Key
chiang2020risksrisk Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Thomas C. Chiang;Chiang, Thomas C.;
Journal risks
Year 2020
DOI
10.3390/risks8020058
URL
https://www.mdpi.com/2227-9091/8/2/58
Keywords
economic policy uncertainty stock–bond correlation vix monetary policy uncertainty fiscal policy uncertainty

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