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Modeling the conditional covariance between stock and bond returns: A multivariate GARCH approach

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  • Goeij, P. C. de

    (Tilburg University)

  • Marquering, W.
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    Bibliographic Info

    Paper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-194709.

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    Date of creation: 2004
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    Publication status: Published in Journal of Financial Econometrics (2004) v.2, p.531-564
    Handle: RePEc:ner:tilbur:urn:nbn:nl:ui:12-194709

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    Web page: http://www.tilburguniversity.edu/

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    References

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    3. Kroner, Kenneth F & Ng, Victor K, 1998. "Modeling Asymmetric Comovements of Asset Returns," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 11(4), pages 817-44.
    4. Braun, Phillip A & Nelson, Daniel B & Sunier, Alain M, 1995. " Good News, Bad News, Volatility, and Betas," Journal of Finance, American Finance Association, American Finance Association, vol. 50(5), pages 1575-1603, December.
    5. Duffie, Darrell & Singleton, Kenneth J, 1997. " An Econometric Model of the Term Structure of Interest-Rate Swap Yields," Journal of Finance, American Finance Association, American Finance Association, vol. 52(4), pages 1287-1321, September.
    6. Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, Elsevier, vol. 52(1-2), pages 5-59.
    7. Robert F. Engle & Victor K. Ng, 1991. "Measuring and Testing the Impact of News on Volatility," NBER Working Papers 3681, National Bureau of Economic Research, Inc.
    8. BAUWENS, Luc & LAURENT, Sébastien & ROMBOUTS, Jeroen, 2003. "Multivariate GARCH models: a survey," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2003031, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    9. Nelson, Daniel B & Foster, Dean P, 1994. "Asymptotic Filtering Theory for Univariate ARCH Models," Econometrica, Econometric Society, Econometric Society, vol. 62(1), pages 1-41, January.
    10. Gita Persand & Chris Brooks & Simon P. Burke, 2003. "Multivariate GARCH models: software choice and estimation issues," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 18(6), pages 725-734.
    11. Andrew W. Lo & A. Craig MacKinlay, 1987. "Stock Market Prices Do Not Follow Random Walks: Evidence From a Simple Specification Test," NBER Working Papers 2168, National Bureau of Economic Research, Inc.
    12. Breen, William & Glosten, Lawrence R & Jagannathan, Ravi, 1989. " Economic Significance of Predictable Variations in Stock Index Returns," Journal of Finance, American Finance Association, American Finance Association, vol. 44(5), pages 1177-89, December.
    13. Daniel B. Nelson, 1994. "Asymptotic Filtering Theory for Multivariate ARCH Models," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0162, National Bureau of Economic Research, Inc.
    14. Karolyi, G Andrew, 1995. "A Multivariate GARCH Model of International Transmissions of Stock Returns and Volatility: The Case of the United States and Canada," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 13(1), pages 11-25, January.
    15. Charles M. Jones & Owen Lamont & Robin Lumsdaine, 1996. "Macroeconomic News and Bond Market Volatility," Home Pages, Princeton University, Department of Economics _005, Princeton University, Department of Economics.
    16. He, Changli & Teräsvirta, Timo, 2002. "An application of the analogy between vector ARCH and vector random coefficient autoregressive models," Working Paper Series in Economics and Finance 516, Stockholm School of Economics.
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    19. Jér�me B. Detemple & René Garcia & Marcel Rindisbacher, 2003. "A Monte Carlo Method for Optimal Portfolios," Journal of Finance, American Finance Association, American Finance Association, vol. 58(1), pages 401-446, 02.
    20. Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993. " On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks," Journal of Finance, American Finance Association, American Finance Association, vol. 48(5), pages 1779-1801, December.
    21. Fleming, Jeff & Kirby, Chris & Ostdiek, Barbara, 1998. "Information and volatility linkages in the stock, bond, and money markets," Journal of Financial Economics, Elsevier, Elsevier, vol. 49(1), pages 111-137, July.
    22. Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 11(01), pages 122-150, February.
    23. French, Kenneth R. & Schwert, G. William & Stambaugh, Robert F., 1987. "Expected stock returns and volatility," Journal of Financial Economics, Elsevier, Elsevier, vol. 19(1), pages 3-29, September.
    24. Engle, Robert F. & Ng, Victor K. & Rothschild, Michael, 1990. "Asset pricing with a factor-arch covariance structure : Empirical estimates for treasury bills," Journal of Econometrics, Elsevier, Elsevier, vol. 45(1-2), pages 213-237.
    25. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, Elsevier, vol. 31(3), pages 307-327, April.
    26. Bollerslev, Tim & Engle, Robert F & Wooldridge, Jeffrey M, 1988. "A Capital Asset Pricing Model with Time-Varying Covariances," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(1), pages 116-31, February.
    27. E.K. Berndt & B.H. Hall & R.E. Hall, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters, National Bureau of Economic Research, Inc, in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 103-116 National Bureau of Economic Research, Inc.
    28. Harvey, Campbell R., 1989. "Time-varying conditional covariances in tests of asset pricing models," Journal of Financial Economics, Elsevier, Elsevier, vol. 24(2), pages 289-317.
    29. Robert F. Engle & Joshua Rosenberg, 1994. "Hedging Options in a GARCH Environment: Testing the Term Structure of Stochastic Volatility Models," NBER Working Papers 4958, National Bureau of Economic Research, Inc.
    30. Daniel B. Nelson, 1994. "Asymptotically Optimal Smoothing with ARCH Models," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0161, National Bureau of Economic Research, Inc.
    31. Jeff Fleming, 2001. "The Economic Value of Volatility Timing," Journal of Finance, American Finance Association, American Finance Association, vol. 56(1), pages 329-352, 02.
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    Cited by:
    1. Cotter, John & Hanly, James, 2007. "Hedging Effectiveness under Conditions of Asymmetry," MPRA Paper 3501, University Library of Munich, Germany.
    2. Dungey, Mardi & McKenzie, Michael & Tambakis, Demosthenes N., 2009. "Flight-to-quality and asymmetric volatility responses in US Treasuries," Global Finance Journal, Elsevier, vol. 19(3), pages 252-267.
    3. de Goeij, Peter & Marquering, Wessel, 2009. "Stock and bond market interactions with level and asymmetry dynamics: An out-of-sample application," Journal of Empirical Finance, Elsevier, Elsevier, vol. 16(2), pages 318-329, March.
    4. Jeroen V.K. Rombouts & Marno Verbeek, 2004. "Evaluating Portfolio Value-at-Risk using Semi-Parametric GARCH Models," Cahiers de recherche 04-14, HEC Montréal, Institut d'économie appliquée.
    5. Johansson, Anders C., 2010. "Stock and Bond Relationships in Asia," Working Paper Series, China Economic Research Center, Stockholm School of Economics 2010-14, China Economic Research Center, Stockholm School of Economics.
    6. Mazzotta, Stefano, 2008. "How important is asymmetric covariance for the risk premium of international assets?," Journal of Banking & Finance, Elsevier, Elsevier, vol. 32(8), pages 1636-1647, August.
    7. de Goeij, Peter & Marquering, Wessel, 2006. "Macroeconomic announcements and asymmetric volatility in bond returns," Journal of Banking & Finance, Elsevier, Elsevier, vol. 30(10), pages 2659-2680, October.
    8. Haas, Markus & Mittnik, Stefan, 2008. "Multivariate regimeswitching GARCH with an application to international stock markets," CFS Working Paper Series 2008/08, Center for Financial Studies (CFS).
    9. Villalba Padilla, Fátima Irina & Flores-Ortega, Miguel, 2014. "Análisis de la volatilidad del índice principal del mercado bursátil mexicano, del índice de riesgo país y de la mezcla mexicana de exportación mediante un modelo GARCH trivariado asimétrico ||," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative M, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 17(1), pages 3-22, June.
    10. de Goeij, Peter & Marquering, Wessel, 2005. "The generalized asymmetric dynamic covariance model," Finance Research Letters, Elsevier, Elsevier, vol. 2(2), pages 67-74, June.
    11. Valadkhani, Abbas & O'Brien, Martin & Karunanayake, Indika, 2009. "Modelling Australian Stock Market Volatility: A Multivariate GARCH Approach," Economics Working Papers, School of Economics, University of Wollongong, NSW, Australia wp09-11, School of Economics, University of Wollongong, NSW, Australia.
    12. Bauwens, Luc & Ben Omrane, Walid & Rengifo, Erick, 2010. "Intradaily dynamic portfolio selection," Computational Statistics & Data Analysis, Elsevier, Elsevier, vol. 54(11), pages 2400-2418, November.
    13. Jin, Xin & Maheu, John M, 2014. "Modeling Covariance Breakdowns in Multivariate GARCH," MPRA Paper 55243, University Library of Munich, Germany.
    14. Goeij, P. C. de & Marquering, W., 2009. "Stock and bond market interactions with level and asymmetry dynamics: An out-of-sample application," Open Access publications from Tilburg University, Tilburg University urn:nbn:nl:ui:12-3557318, Tilburg University.

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