Is Corporate Bond Market Performance Connected with Stock Market Performance?

Abstract : Stock markets and bond markets are known to interact. Specifically, the common stock market trend (i.e., business cycle also termed market/ systematic risk) impacts the common corporate bond market trend (i.e.,credit cycle). First, we disentangle the common latent component from total stock returns, namely the common systematic/unobserved stock market component. Second, we extract the common latent component from total bond returns, namely the common unobserved/systematic corporate bond component.Then, we estimate the dynamic relationship between systematic total stock returns and systematic total bond returns over time (i.e., co- and antimonotonicity risk). We characterize therefore the time-varying correlation risk (i.e., correlation risk structure) between stock performance and corporate bond performance. Results are instructive in a dynamic risk management prospect with regard to equity- and corporate bond-based portfolios. . .
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Article dans une revue
Bankers Markets & Investors : an academic & professional review, Groupe Banque, 2009, n° 102, pp.46-59
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Contributeur : Emilie Breton <>
Soumis le : dimanche 13 février 2011 - 14:06:05
Dernière modification le : dimanche 13 février 2011 - 14:25:49

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  • HAL Id : hal-00565492, version 1

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Hayette Gatfaoui. Is Corporate Bond Market Performance Connected with Stock Market Performance?. Bankers Markets & Investors : an academic & professional review, Groupe Banque, 2009, n° 102, pp.46-59. 〈hal-00565492〉

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