Conditional Coskewness in Stock and Bond Markets: Time-Series Evidence
AbstractIn the context of a three-moment intertemporal capital asset pricing model specification, we characterize conditional coskewness between stock and bond excess returns using a bivariate regime-switching model. We find that both conditional U.S. stock coskewness (the relation between stock return and bond volatility) and bond coskewness (the relation between bond return and stock volatility) command statistically and economically significant negative ex ante risk premiums. The impacts of stock and bond coskewness on the conditional stock and bond premiums are quite robust to various model specifications and various sample periods, and also hold in another major developed country (the United Kingdom). The findings also carry important implications for portfolio management.
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Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 56 (2010)
Issue (Month): 11 (November)
regime switching; conditional coskewness; intertemporal asset pricing; stock and bond comovements;
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- Guglielmo Maria Caporale & Alessandro Girardi & Paolo Paesani, 2010.
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Discussion Papers of DIW Berlin
1080, DIW Berlin, German Institute for Economic Research.
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