AbstractMany investment companies hold diversified asset portfolios and frequently try to mirror or outperform a market index for each asset class such as stocks and bonds. As Wibaut and Wilford (2009) show, often the same issuers appear in each of those indices and this may lead to undesirable results such as during a crisis period. Our research further explores the topic of diversification with a special focus on the financial crisis period of 2007 through 2009. Our results indicate that there is benefit in terms of correlations from holding bond and stock portfolios. Interestingly, these findings show the benefit is most pronounced during times of market stress.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Elsevier in its journal Research in International Business and Finance.
Volume (Year): 26 (2012)
Issue (Month): 2 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/ribaf
Investments; Financial crisis; Diversification; Asset correlation;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kwan, Simon H., 1996. "Firm-specific information and the correlation between individual stocks and bonds," Journal of Financial Economics, Elsevier, vol. 40(1), pages 63-80, January.
- Huang, Mei-Yueh & Lin, Jun-Biao, 2011. "Do ETFs provide effective international diversification?," Research in International Business and Finance, Elsevier, vol. 25(3), pages 335-344, September.
- Campbell, John Y & Ammer, John, 1993.
" What Moves the Stock and Bond Markets? A Variance Decomposition for Long-Term Asset Returns,"
Journal of Finance,
American Finance Association, vol. 48(1), pages 3-37, March.
- Tom Doan, . "RATS programs to replicate Campbell and Ammer's JOF 1993 paper," Statistical Software Components RTZ00029, Boston College Department of Economics.
- Campbell, J.Y. & Ammer, J., 1991. "What Moves The Stock And Bond Markets? A Variance Decomposition For Long- Term Asset Returns," Papers 127, Princeton, Department of Economics - Financial Research Center.
- John Y. Campbell & John Ammer, 1991. "What Moves the Stock and Bond Markets? A Variance Decomposition for Long-Term Asset Returns," NBER Working Papers 3760, National Bureau of Economic Research, Inc.
- Ammer, John & Campbell, John, 1993. "What Moves the Stock and Bond Markets? A Variance Decomposition for Long-Term Asset Returns," Scholarly Articles 3382857, Harvard University Department of Economics.
- Connolly, Robert & Stivers, Chris & Sun, Licheng, 2005. "Stock Market Uncertainty and the Stock-Bond Return Relation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(01), pages 161-194, March.
- Pástor, Luboš & Stambaugh, Robert F, 2002.
"Liquidity Risk and Expected Stock Returns,"
CEPR Discussion Papers
3494, C.E.P.R. Discussion Papers.
- Lubos Pastor & Robert F. Stambaugh, 2001. "Liquidity Risk and Expected Stock Returns," NBER Working Papers 8462, National Bureau of Economic Research, Inc.
- Luboš Pástor & Robert F. Stambaugh, . "Liquidity Risk and Expected Stock Returns," CRSP working papers 531, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Kristin Forbes & Roberto Rigobon, 1999.
"No Contagion, Only Interdependence: Measuring Stock Market Co-movements,"
NBER Working Papers
7267, National Bureau of Economic Research, Inc.
- Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October.
- Banerjee, Prithviraj S. & Doran, James S. & Peterson, David R., 2007. "Implied volatility and future portfolio returns," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 3183-3199, October.
- Smith, Kenneth L. & Swanson, Peggy E., 2008. "The dynamics among G7 government bond and equity markets and the implications for international capital market diversification," Research in International Business and Finance, Elsevier, vol. 22(2), pages 222-245, June.
- Baur, Dirk G. & Lucey, Brian M., 2009. "Flights and contagion--An empirical analysis of stock-bond correlations," Journal of Financial Stability, Elsevier, vol. 5(4), pages 339-352, December.
- Inci, A. Can & Li, H.C. & McCarthy, Joseph, 2011. "Financial contagion: A local correlation analysis," Research in International Business and Finance, Elsevier, vol. 25(1), pages 11-25, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wendy Shamier).
If references are entirely missing, you can add them using this form.