Realized Bond-Stock Correlation: Macroeconomic Announcement Effects

January 1, 2006
Issue 2006-02

Summary

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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Issue:
02
Pages:
34
JEL classification:
G12, G13, G14
Keywords:
Bond-stock correlation, Macroeconomic announcements, Realized correlation, Realized volatility
Year:
2006

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Author(s)

  • Charlotte Christiansen

  • Angelo Ranaldo

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