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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
    Date of revision:
    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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    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.:
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    1. 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, vol. 96(1), pages 116-31, February.
    2. Chris Brooks & Simon Burke & Gita Persand, 2003. "Multivariate GARCH Models: Software Choice and Estimation Issues," ICMA Centre Discussion Papers in Finance icma-dp2003-07, Henley Business School, Reading University.
    3. Kroner, Kenneth F & Ng, Victor K, 1998. "Modeling Asymmetric Comovements of Asset Returns," Review of Financial Studies, Society for Financial Studies, vol. 11(4), pages 817-44.
    4. Andrew W. Lo & A. Craig MacKinlay, 1989. "Stock Market Prices Do Not Follow Random Walks: Evidence From a Simple Specification Test," NBER Working Papers 2168, National Bureau of Economic Research, Inc.
    5. Hentschel, Ludger & Campbell, John, 1992. "No News is Good News: An Asymmetric Model of Changing Volatility in Stock Returns," Scholarly Articles 3220232, Harvard University Department of Economics.
    6. Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(01), pages 122-150, February.
    7. Braun, Phillip A & Nelson, Daniel B & Sunier, Alain M, 1995. " Good News, Bad News, Volatility, and Betas," Journal of Finance, American Finance Association, vol. 50(5), pages 1575-1603, December.
    8. Daniel B. Nelson, 1994. "Asymptotic Filtering Theory for Multivariate ARCH Models," NBER Technical Working Papers 0162, National Bureau of Economic Research, Inc.
    9. Jérôme B. Detemple & René Garcia & Marcel Rindisbacher, 2000. "A Monte-Carlo Method for Optimal Portfolios," CIRANO Working Papers 2000s-05, CIRANO.
    10. Sébastien Laurent & Luc Bauwens & Jeroen V. K. Rombouts, 2006. "Multivariate GARCH models: a survey," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(1), pages 79-109.
    11. 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.
    12. Fama, Eugene F & French, Kenneth R, 1988. "Permanent and Temporary Components of Stock Prices," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 246-73, April.
    13. Lo, Andrew W & MacKinlay, A Craig, 1990. "When Are Contrarian Profits Due to Stock Market Overreaction?," Review of Financial Studies, Society for Financial Studies, vol. 3(2), pages 175-205.
    14. 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, vol. 48(5), pages 1779-1801, December.
    15. Jeff Fleming, 2001. "The Economic Value of Volatility Timing," Journal of Finance, American Finance Association, vol. 56(1), pages 329-352, 02.
    16. Breen, William & Glosten, Lawrence R & Jagannathan, Ravi, 1989. " Economic Significance of Predictable Variations in Stock Index Returns," Journal of Finance, American Finance Association, vol. 44(5), pages 1177-89, December.
    17. Fleming, Jeff & Kirby, Chris & Ostdiek, Barbara, 1998. "Information and volatility linkages in the stock, bond, and money markets," Journal of Financial Economics, Elsevier, vol. 49(1), pages 111-137, July.
    18. Duffie, Darrell & Singleton, Kenneth J, 1997. " An Econometric Model of the Term Structure of Interest-Rate Swap Yields," Journal of Finance, American Finance Association, vol. 52(4), pages 1287-1321, September.
    19. 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, vol. 45(1-2), pages 213-237.
    20. French, Kenneth R. & Schwert, G. William & Stambaugh, Robert F., 1987. "Expected stock returns and volatility," Journal of Financial Economics, Elsevier, vol. 19(1), pages 3-29, September.
    21. Engle, Robert F & Ng, Victor K, 1993. " Measuring and Testing the Impact of News on Volatility," Journal of Finance, American Finance Association, vol. 48(5), pages 1749-78, December.
    22. 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, vol. 52(1-2), pages 5-59.
    23. E.K. Berndt & B.H. Hall & R.E. Hall, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 103-116 National Bureau of Economic Research, Inc.
    24. Nelson, Daniel B & Foster, Dean P, 1994. "Asymptotic Filtering Theory for Univariate ARCH Models," Econometrica, Econometric Society, vol. 62(1), pages 1-41, January.
    25. Bekaert, Geert & Wu, Guojun, 2000. "Asymmetric Volatility and Risk in Equity Markets," Review of Financial Studies, Society for Financial Studies, vol. 13(1), pages 1-42.
    26. Engle, Robert F & Lilien, David M & Robins, Russell P, 1987. "Estimating Time Varying Risk Premia in the Term Structure: The Arch-M Model," Econometrica, Econometric Society, vol. 55(2), pages 391-407, March.
    27. Miguel A. Ferreira & Jose A. Lopez, 2004. "Evaluating interest rate covariance models within a value-at-risk framework," Working Papers in Applied Economic Theory 2004-03, Federal Reserve Bank of San Francisco.
    28. 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, vol. 13(1), pages 11-25, January.
    29. Harvey, Campbell R., 1989. "Time-varying conditional covariances in tests of asset pricing models," Journal of Financial Economics, Elsevier, vol. 24(2), pages 289-317.
    30. 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.
    31. Daniel B. Nelson, 1994. "Asymptotically Optimal Smoothing with ARCH Models," NBER Technical Working Papers 0161, National Bureau of Economic Research, Inc.
    32. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
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    Cited by:
    1. Mazzotta, Stefano, 2008. "How important is asymmetric covariance for the risk premium of international assets?," Journal of Banking & Finance, Elsevier, vol. 32(8), pages 1636-1647, August.
    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, 2006. "Macroeconomic announcements and asymmetric volatility in bond returns," Journal of Banking & Finance, Elsevier, vol. 30(10), pages 2659-2680, October.
    4. de Goeij, Peter & Marquering, Wessel, 2005. "The generalized asymmetric dynamic covariance model," Finance Research Letters, Elsevier, vol. 2(2), pages 67-74, June.
    5. Cotter, John & Hanly, Jim, 2005. "Hedging and risk aversion constraints," Open Access publications from University College Dublin urn:hdl:10197/1698, University College Dublin.
    6. John Cotter & Jim Hanly, 2011. "Hedging Effectiveness under Conditions of Asymmetry," Papers 1103.5411, arXiv.org.
    7. 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, vol. 16(2), pages 318-329, March.
    8. Marno Verbeek & Jeroen VK Rombouts, 2005. "Evaluating Portfolio Value-at-Risk using Semi-Parametric GARCH Models," Computing in Economics and Finance 2005 40, Society for Computational Economics.
    9. Johansson, Anders C., 2010. "Stock and Bond Relationships in Asia," Working Paper Series 2010-14, China Economic Research Center, Stockholm School of Economics.
    10. Valadkhani, Abbas & O'Brien, Martin & Karunanayake, Indika, 2009. "Modelling Australian Stock Market Volatility: A Multivariate GARCH Approach," Economics Working Papers wp09-11, School of Economics, University of Wollongong, NSW, Australia.
    11. 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 urn:nbn:nl:ui:12-3557318, Tilburg University.
    12. Le Pen, Yannick & Sévi, Benoît, . "News and correlations: an impulse response analysis," Open Access publications from Université Paris-Dauphine urn:hdl:123456789/6804, Université Paris-Dauphine.
    13. Bauwens, Luc & Ben Omrane, Walid & Rengifo, Erick, 2010. "Intradaily dynamic portfolio selection," Computational Statistics & Data Analysis, Elsevier, vol. 54(11), pages 2400-2418, November.

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