Macro-Finance Determinants of the Long-Run Stock-Bond Correlation: The DCC-MIDAS Specification
2016 (English)In: Journal of Financial Econometrics, ISSN 1479-8409, E-ISSN 1479-8417Article in journal (Refereed) Published
We investigate long-run stock–bond correlation using a model that combines the dynamic conditional correlation model with the mixed-data sampling approach and allows long-run correlation to be affected by macro-finance factors (historical and forecasts). We use macro-finance factors related to inflation and interest rates, illiquidity, state of the economy, and market uncertainty. Macro-finance factors, particularly their forecasts, are good at forecasting long-run stock–bond correlation. Supporting the flight-to-quality phenomenon, long-run correlation tends to be small and negative when the economy is weak.
Place, publisher, year, edition, pages
DCC-MIDAS model; Long-run correlation; Macro-finance factors; Stock–bond correlation
Research subject Economics
IdentifiersURN: urn:nbn:se:su:diva-123395OAI: oai:DiVA.org:su-123395DiVA: diva2:873685