Realized Bond-Stock Correlation: Macroeconomic Announcement Effects

By Charlotte Christiansen, Angelo Ranaldo. 2007

142 citations recorded by the source corpus.

We investigate the effects of macroeconomic announcements on the realized correlation between bond and stock returns. Our results deliver insights into the dominating drivers of bond-stock comovements. We find that it is not so much the surprise component of the announcement, but the mere fact that an announcement occurs that influences the realized bond-stock correlation. The impact of macroeconomic announcements varies across the business cycle. Announcement effects are highly dependent on the sign of the realized bond-stock correlation which has recently gone from positive to negative. Macroeconomic announcement effects on realized bond and stock volatilities are also investigated.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/981fb2e187339a4e248f730ea5980bb7aa8e33fe

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In Economics and Econometrics

1. Menachem Brenner
2. Marti G. Subrahmanyam
3. Paolo Pasquariello
4. Jarl G. Kallberg

In Finance

1. Marti G. Subrahmanyam
2. Menachem Brenner
3. Paolo Pasquariello
4. Jarl G. Kallberg

Citations in the corpus

• Inflation Bets or Deflation Hedges? The Changing Risks of Nominal Bonds (2013, unknown): “The covariance of nominal bond returns with stock returns, for example, is extremely unstable over time and even switches sign (Li 2002, Guidolin and Timmermann 2006, Christiansen and Ranaldo 2007, David and Veronesi 2009, Baele, Bekaert, and Inghelbrecht 2010, Viceira 2010).”
• Safe Haven Currencies (2010, unknown): “If no trades occur in a given 5-minute interval, we copy down the last trading price in the previous time interval (see Andersen, Bollerslev, Diebold, and Vega (2004) and Christiansen and Ranaldo (2007)).”
• On the Volatility and Comovement of U.S. Financial Markets Around Macroeconomic News Announcements (2009, background): “Along those lines, Christiansen and Ranaldo (2007) use futures intraday data to measure realized Treasury bond-U.”