Regime shifts in the stock - Bond relation in Australia

Garry Hobbes; Frewen Lam; Geoffrey F. Loudon

doi:10.1142/S0219091507000969

Regime shifts in the stock - Bond relation in Australia

Garry Hobbes^*, Frewen Lam, Geoffrey F. Loudon

^*Corresponding author for this work

Department of Accounting and Corporate Governance

Research output: Contribution to journal › Article › peer-review

8 Citations (Scopus)

Abstract

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.

Original language	English
Pages (from-to)	81-99
Number of pages	19
Journal	Review of Pacific Basin Financial Markets and Policies
Volume	10
Issue number	1
DOIs	https://doi.org/10.1142/S0219091507000969
Publication status	Published - Mar 2007

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Regime shifts in the stock - Bond relation in Australia

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