Paper Title :Multiscale Stock-Bond Return Relations and Macroeconomic Factors: Evidence from G7 Countries
Author :Fu-Lai Lin, Yu-Fen Chen
Article Citation :Fu-Lai Lin ,Yu-Fen Chen ,
(2018 ) " Multiscale Stock-Bond Return Relations and Macroeconomic Factors: Evidence from G7 Countries " ,
International Journal of Management and Applied Science (IJMAS) ,
pp. 23-29,
Volume-4,Issue-1
Abstract : This paper aims to investigate the time variation features of stock-bond return relations and examine how macroeconomic
conditions affect dynamic relations across different frequencies. The data covers seven major industrialized economies:
United States (USA), Canada, United Kingdom (UK), France, Germany, Italy, and Japan for the sample period April 2, 1991
through December 31, 2014. First, wavelet coherency results show that the stock-bond relations vary across frequencies and
over time. The relations shift from sizably positive to predominantly negative in the late 1990s in most G7 countries, except for
Japan. Moreover, stock-bond return relations across different frequencies are driven by global and country-specific economic
and financial market conditions for each country. We find that an increase in the domestic bond market uncertainty may
increase the stock-bond relation, while an increase in the domestic stock market uncertainty tends to reduce the relation. In
addition, stock-bond return relations have positive sign sensitivity to TED spread, while their sensitivity to global stock market
volatility is negative. Thus, the empirical findings serve to guide not only investors in making their portfolio allocations, but
also policy makers in monitoring financial markets by observing changes in domestic and global macroeconomic conditions.
Keywords - Global and country-specific economic and financial conditions, Stock-bond return relations, Wavelet analysis
Type : Research paper
Published : Volume-4,Issue-1
Copyright: © Institute of Research and Journals
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Published on 2018-03-29 |
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