Advanced

Macro-Finance Determinants of the Long-Run Stock-Bond Correlation: The DCC-MIDAS Specification

Asgharian, Hossein LU ; Christiansen, Charlotte and HOU, Ai Jun LU (2014) In Working Paper / Department of Economics, School of Economics and Management, Lund University
Abstract
We investigate the long-run stock-bond correlation using a novel model that combines the dynamic conditional correlation model with the mixed-data sampling approach. The long-run correlation is affected by both macro-finance variables (historical and forecasts) and the lagged realized correlation itself. Macro-finance variables and the lagged realized correlation are simultaneously significant in forecasting the long-run stock-bond correlation. The behavior of the long-run stock-bond correlation is very different when estimated taking the macro-finance variables into account. Supporting the flight-to-quality phenomenon for the total stock-bond correlation, the long-run correlation tends to be small/negative when the economy is weak.
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Working Paper
publication status
published
subject
keywords
DCC-MIDAS model, Long-run correlation, Macro-finance variables, Stock-bond correlation
in
Working Paper / Department of Economics, School of Economics and Management, Lund University
issue
37
pages
39 pages
publisher
Department of Economics, Lund Universtiy
language
English
LU publication?
yes
id
0996a67f-48e9-4899-b3e9-d08e17701e4b (old id 4814678)
alternative location
http://swopec.hhs.se/lunewp/abs/lunewp2014_037.htm
date added to LUP
2014-11-27 16:38:45
date last changed
2016-09-14 11:29:50
@misc{0996a67f-48e9-4899-b3e9-d08e17701e4b,
  abstract     = {We investigate the long-run stock-bond correlation using a novel model that combines the dynamic conditional correlation model with the mixed-data sampling approach. The long-run correlation is affected by both macro-finance variables (historical and forecasts) and the lagged realized correlation itself. Macro-finance variables and the lagged realized correlation are simultaneously significant in forecasting the long-run stock-bond correlation. The behavior of the long-run stock-bond correlation is very different when estimated taking the macro-finance variables into account. Supporting the flight-to-quality phenomenon for the total stock-bond correlation, the long-run correlation tends to be small/negative when the economy is weak.},
  author       = {Asgharian, Hossein and Christiansen, Charlotte and HOU, Ai Jun},
  keyword      = {DCC-MIDAS model,Long-run correlation,Macro-finance variables,Stock-bond correlation},
  language     = {eng},
  number       = {37},
  pages        = {39},
  publisher    = {ARRAY(0xb450e30)},
  series       = {Working Paper / Department of Economics, School of Economics and Management, Lund University},
  title        = {Macro-Finance Determinants of the Long-Run Stock-Bond Correlation: The DCC-MIDAS Specification},
  year         = {2014},
}