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Macro-Finance Determinants of the Long-Run Stock-Bond Correlation: The DCC-MIDAS Specification
Stockholm University, Faculty of Social Sciences, Stockholm Business School. (Finance)
2016 (English)In: Journal of Financial Econometrics, ISSN 1479-8409, E-ISSN 1479-8417Article in journal (Refereed) Published
Abstract [en]

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
2016.
Keyword [en]
DCC-MIDAS model; Long-run correlation; Macro-finance factors; Stock–bond correlation
National Category
Business Administration
Research subject
Economics
Identifiers
URN: urn:nbn:se:su:diva-123395OAI: oai:DiVA.org:su-123395DiVA: diva2:873685
Available from: 2015-11-24 Created: 2015-11-24 Last updated: 2015-11-25Bibliographically approved

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Ai Jun, Hou
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