Abstract
AbstractThe returns of equities and bonds tend to be positively correlated, but in extreme situations this relation reverses. Large negative equity returns co‐occur with large positive bond returns. This is potentially caused by investors reassessing their risk preferences and shifting their wealth to less risky asset classes, which is frequently termed flight to quality. We examine macroeconomic factors to identify the driving variables using a conditional copula model. Analysing quarterly data from 1952 to 2014, we find that the Treasury bill rate is the most significant driver. This insight is useful for asset allocation and risk management.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: 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.