Stock Market Uncertainty and the Stock-Bond Return Relation

By Robert A. Connolly, Chris Stivers, Licheng Sun. 2005

644 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/d9adf1cb2c7001821c75658bfdf35eb9be1ac625

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Citations in the corpus

Commonality in the time-variation of stock-stock and stock-bond return comovements (2007, background): “…2002; Kodres and Pritsker, 2002; Ang and Bekaert, 2002; Ang and Chen, 2002; Ribeiro and Veronesi, 2002; Corsetti et al., 2005) and stock–bond comovement (see, e.g., Fleming et al., 1998, 2001; Scruggs and Glabadanidis, 2003; Hartmann et al., 2004; Connolly et al., 2005; Gulko, 2002; Li, 2002).”
Real-Time Price Discovery in Global Stock, Bond and Foreign Exchange Markets (2006, positive): “The VIX may in turn be interpreted as a state variable related to the level of economic uncertainty and the stage of the business cycle in the sense of David and Veronesi (2004) and Ribeiro and Veronesi (2002).”
The effect of economic policy uncertainty on the long-term correlation between U.S. stock and bond markets (2017, background): “The timevarying relationship between them has received considerable attention, and there have been many attempts to understand their co-movement during the past few years (Kim et al., 2006; Connolly et al., 2005; Aslanidis and Christiansen, 2014; Chen et al., 2014).”
US Economic Policy Uncertainty and Co-Movements between Chinese and US Stock Markets (2017, positive): “An earlier study by Connolly et al. (2005) also detects negative effects of absolute changes in uncertainty (measured by implied volatility) on the future stock-bond correlation.”
Comovement and Predictability Relationships Between Bonds and the Cross-section of Stocks (2012, background): “Gulko (2002) finds that decoupling is associated with steep stock market declines, and, relatedly, Connolly, Stivers, and Sun (2005) find that the correlation falls when the implied volatility of equity index options rises, which also happens during market declines.”
Flatten the Curve and Stock Market Liquidity – An Inquiry into Emerging Economies (2020, result): “With increasing uncertainty among investors in the middle of a pandemic, our results are consistent with earlier studies (e.g. Baur and Lucey 2010; Connolly, Stivers, and Sun 2005) demonstrating that equity investors turn to safer assets (e.g. gold, bonds, etc.) in uncertain times.”
Does sovereign debt ratings news spill over to international stock markets (2007, background): “Other evidence on low (or even negative) stock-bond correlation is inconclusive as to the expected direction of the reaction to a rating revision (Connolly et al., 2005).”
Macro-Finance Determinants of the Long-Run Stock-Bond Correlation: The DCC-MIDAS Specification (2016, positive): “Connolly et al. (2005, 2007) investigate how the stock market uncertainty (measured by the VXO volatility index) influences the stock-bond comovement and show that the comovement is positive (negative) following periods with low (hig) uncertainty.”
No contagion, only globalization and flight to quality (2012, background): “This is particularly the case for correlations between bonds and equities (Connolly et al., 2005).”
Why does the correlation between stock and bond returns vary over time? (2008, methodology): “Following Connolly et al. (2005), volatility estimates extracted from option prices are used to assess stock market uncertainty.”
Flights to Safety (2014, positive): “Connolly et al. (2005) and Bansal et al. (2010) show that periods of higher stock market volatility are associated with lower correlations between stock and bond returns and with higher bond returns.”
Dynamic Herding Behavior in Pacific-Basin Markets: Evidence and Implications (2013, background): “Demirer and Kutan (2006) investigate the Chinese market, and find no evidence of herding, suggesting that participants in the Chinese stock market make investment choices rationally. However, using a different data set, Tan et al. (2008) report that herding in Chinese stock markets occurs under both”
Geopolitical risks and the oil-stock nexus over 1899–2016 (2017, methodology): “2 Multivariate GARCH models have been widely used to study covariance of stocks and bonds (Longin and Solnik 1995; Kim et al. 2006; Connolly et al. 2005, 2007; Yang et al 2009; Kollias et al, 2013b).”
Asymmetric Correlation and Volatility Dynamics among Stock, Bond, and Securitized Real Estate Markets (2010, background): “Also, recent literature (e.g. Connolly, Stivers, and Sun, 2005) showed that stock market volatility may be an important factor driving stock-bond correlations.”