Realized Bond-Stock Correlation: Macroeconomic Announcement Effects | Zendy

Charlotte Christiansen | Zendy; Angelo Ranaldo | Zendy

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Realized Bond-Stock Correlation: Macroeconomic Announcement Effects

Author(s) -

Charlotte Christiansen,

Angelo Ranaldo

Publication year - 2005

Publication title -

ssrn electronic journal

Language(s) - English

Resource type - Journals

ISSN - 1556-5068

DOI - 10.2139/ssrn.746364

Subject(s) - bond , stock (firearms) , economics , monetary economics , econometrics , financial system , business , financial economics , finance , engineering , mechanical engineering

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.

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