Abstract
This study analyzes the relationship between the forward-looking stock-bond return correlations and the number of COVID-19 cases using a quantile approach that is beneficial to explore non-linear relationships. It shows that there are heterogeneous responses across regions and countries. Specifically, the negative stock-bond correlations weaken as the number of confirmed cases in the regions of North America (the U. S. and Canada) and Asia-Pacific (Australia and Japan) increases. These findings suggest that uncertainty triggered by COVID-19 impacts the financial markets more significantly than the actual confirmed cases. Our result also highlights that this pattern is not observed in European countries.
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