Please use this identifier to cite or link to this item: http://hdl.handle.net/1893/27949
Appears in Collections:Accounting and Finance Journal Articles
Peer Review Status: Refereed
Title: The information content of the stock and bond return correlation
Author(s): McMillan, David G
Keywords: stock returns
bond returns
correlation
predictability
macroeconomy
recession
Issue Date: 31-Dec-2018
Citation: McMillan DG (2018) The information content of the stock and bond return correlation. Quantitative Finance and Economics, 2 (3), pp. 757-775. https://doi.org/10.3934/qfe.2018.3.757.
Abstract: We believe that the correlation between stock and bond returns carries information for the future values of these return series and economic conditions more widely. The correlation reflects investor perceptions regarding future economic performance, with a declining and negative correlation indicating heightened economic and market risk. Using US data from 1900, we show that the correlation has predictive power for subsequent stock and bond returns and can be used in a market timing strategy to improve portfolio performance. Moreover, the correlation also predicts bear market periods. Further, the correlation contains predictive power for a set of key macroeconomic variables, and has predictive content for contractionary periods. We believe the results in the paper are of interest and relevance to academics, practitioners and policy-makers.
DOI Link: 10.3934/qfe.2018.3.757
Rights: © 2018 the Author(s), licensee AIMS Press. This is an open access article distributed under the terms of the Creative Commons Attribution Licese (http://creativecommons.org/licenses/by/4.0)

Files in This Item:
File Description SizeFormat 
QFE-02-03-757.pdfFulltext - Published Version370.33 kBAdobe PDFView/Open



This item is protected by original copyright



Items in the Repository are protected by copyright, with all rights reserved, unless otherwise indicated.

If you believe that any material held in STORRE infringes copyright, please contact library@stir.ac.uk providing details and we will remove the Work from public display in STORRE and investigate your claim.