Dynamic Correlation of Stock and Bond Return in Five Asian Markets with Determinants of Macroeconomic Conditions and Market Uncertainty
Zheng, Junyang (2015) Dynamic Correlation of Stock and Bond Return in Five Asian Markets with Determinants of Macroeconomic Conditions and Market Uncertainty. [Dissertation (University of Nottingham only)]
This paper examines the dynamic correlation between stock and bond returns for five Asian markets with advanced economy. Test Statistics suggest that co-movements of stock-bond return are time-varying over last 15 years in all introduced markets exclude the sample in Taiwan. The stock-bond correlations are positively and negatively correlated with expected CPI and GDP, respectively.Besides, the impact from stock uncertainty measured by implied volatility and conditional variance is not dominant among other determinants. Nonetheless, conditional variance of bond market is significantly and negatively correlated with the correlation of stock-bond return with a numerous value of estimation. Next, segmented test is employed to show that macroeconomic conditions have time-varying and cross-sectional effect where the sign of estimation changes over time and countries. Also, phenomenon of ‘flight to quality’ is partially proved in this paper.
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