Abstract
Using a high-frequency dataset, we analyze the effects of risk-aversion and real-time macroeconomic variables on both conditional variances and stock-bond correlations in the Eurozone. We use a generalized DCCX model for correlations and a GARCHX model for variances in order to separate the effects on the dependence structure from those on the volatility. We find that correlations fall as risk aversion rises even when controlling for macroeconomic announcements. Interestingly, the additional effects of the financial crisis are only small. While most macroeconomic news result in falling conditional correlations, the publication of news concerning future interest rates or inflation figures moves bond and stock prices in the same direction.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
