Regime shifts in the stock-bond relation in Australia | Macquarie University ResearchOnline

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Title: Regime shifts in the stock-bond relation in Australia
Related: Review of Pacific basin financial markets and policies, Vol. 10, No. 1, p.81-99
Publisher: World Scientific Publishing Company
Date: 2007
FoR/RFCD Code(s): 150200 Banking, Finance and Investment
Author/Creator: Hobbes, Garry
Author/Creator: Lam, Frewen
Author/Creator: Loudon, Geoffrey F
Description: Previous evidence suggests that the implied volatility from equity index options, as a measure of stock market uncertainty, can provide "forward-looking information" about the stock–bond return correlation. This paper uses an alternative regime-switching autoregressive model to characterize state-dependent stock–bond return comovement and to evaluate the contribution of implied volatility in understanding transition dynamics. We confirm that implied volatility provides information about transition dynamics which is not inherent in the stock and bond returns, notwithstanding several different features of our data set and methodological approach.
Description: 19 page(s)
Subject Keyword: 150200 Banking, Finance and Investment
Subject Keyword: Asset pricing regime-switching volatility
Subject Keyword: asset pricing
Subject Keyword: regime-switching
Subject Keyword: volatility
Resource Type: journal article
Organisation: Macquarie University. Dept. of Accounting and Finance

Macquarie University ResearchOnline