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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.
2016 (English)In: Journal of Financial Econometrics, ISSN 1479-8409, E-ISSN 1479-8417, Vol. 14, no 3, 617-642 p.Article 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. Vol. 14, no 3, 617-642 p.
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-123395DOI: 10.1093/jjfinec/nbv025ISI: 000381162100006OAI: oai:DiVA.org:su-123395DiVA: diva2:873685
Available from: 2015-11-24 Created: 2015-11-24 Last updated: 2016-10-03Bibliographically approved

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Hou, Ai Jun
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CiteExportLink to record
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Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
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  • Other locale
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Output format
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