Effects of macroeconomic uncertainty on the stock and bond markets

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Abstract

In this paper we show that the long-run stock and bond volatility and the long-run stock-bond correlation depend on macroeconomic uncertainty. We use the mixed data sampling (MIDAS) econometric approach. The findings are in accordance with the flight-to-quality phenomenon when macroeconomic uncertainty is high. (C) 2015 Elsevier Inc. All rights reserved.

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Research areas and keywords

Subject classification (UKÄ) – MANDATORY

  • Economics

Keywords

  • DCC-MIDAS model, GARCH-MIDAS model, Macroeconomic uncertainty index, Stock-bond correlation, Stock volatility, Bond volatility
Original languageEnglish
Pages (from-to)10-16
JournalFinance Research Letters
Volume13
StatePublished - 2015
Publication categoryResearch
Peer-reviewedYes