Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
961179 | Journal of Financial Markets | 2007 | 27 Pages |
Abstract
We jointly investigate time-varying comovements between stock returns across countries and between long-term government bond and stock returns within countries. Our focus is on how daily return comovements vary with stock uncertainty, as measured by the implied volatility (IV) from equity index options. Cross-country stock return comovements tend to be stronger (weaker) following high (low) IV days and on days with large (small) changes in IV. Stock-bond return comovements tend to be substantially positive (negative) following low (high) IV days and on days with small (large) changes in IV. A regime-switching analysis also indicates a striking temporal commonality in the stock-stock and stock-bond comovement variations. Our findings bear on understanding the influence of time-varying uncertainty on price formation and the diversification benefits of stock-bond and cross-country stock holdings.
Keywords
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Robert A. Connolly, Chris Stivers, Licheng Sun,