Scandinavian Working Papers in Business Administration

Finance Research Group Working Papers,
University of Aarhus, Aarhus School of Business, Department of Business Studies

No F-2005-05: Realized Bond-Stock Correlation: Macroeconomic Announcement Effects

Charlotte Christiansen () and Angelo Ranaldo ()
Additional contact information
Charlotte Christiansen: Department of Accounting, Aarhus School of Business, Postal: The Aarhus School of Business, Fuglesangs Allé 4, 8210 Aarhus V, Denmark
Angelo Ranaldo: Research Department, Swiss National Bank, Postal: Research Department, Swiss National Bank, Switzerland

Abstract: 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

Keywords: Bond-stock correlation; Macroeconomic announcements; Realized correlation; Realized volatility

31 pages, September 23, 2005

Note: Published in: C. Christiansen and A. Ranaldo (2007), "Realized Stock-Bond Correlation: Macroeconomic Announcement Effects", Journal of Futures Markets, 27(5), 439-469.

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