Quantiles of the Realized Stock-Bond Correlation and Links to the Macroeconomy
Associate Professor Nektarios Aslanidis, Departament d' Economia; Universitat Rovira i Virgili, CREIP ; Spain
20th Sep 2013 11:00 am - Room 498 Merewether Bldg
This paper adopts quantile regressions to scrutinize the realized stock-bond correlation based upon high frequency returns. The paper provides in-sample and out-of-sample analysis and considers a large number of macro-finance predictors well-know from the return predictability literature. Strong in-sample predictability is obtained from quantile models with factor-augmented predictors, particularly at the lower to median quantiles. Out-of-sample the quantile factor model works best at the median to upper quantiles. Investor sentiment generally does not significantly affect the quantiles of the realized stock bond corrrelation.
Keywords: Realized stock-bond correlation; Quantile regressions; Macro-finance variables; Factor analysis; Investor sentiment.
JEL Classifications: C22; G11; G12