Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/260133
Year of Publication: 
2014
Series/Report no.: 
Working Paper No. 2014:37
Publisher: 
Lund University, School of Economics and Management, Department of Economics, Lund
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.
Subjects: 
DCC-MIDAS model
Long-run correlation
Macro-finance variables
Stock-bond correlation
JEL: 
C32
C58
E32
E44
G11
G12
Document Type: 
Working Paper

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