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Persistence and Long-Run Linkages Between US Stock Market Prices and Bond Yields

Author

Listed:
  • Juan Diego Cafferata Salazar
  • Guglielmo Maria Caporale
  • Luis Alberiko Gil-Alana

Abstract

This paper uses fractional integration and cointegration methods to examine the persistence and long-run relationship between the S&P 500 index and the nominal yield to maturity of 10-year US Treasury bonds (GS10) over the period from January 1954 to December 2024. The results indicate that both series are highly persistent and can be characterised as non-stationary processes with an order of integration close to 1. Granger causality tests imply unidirectional causality running from stock prices (S&P 500) to bond yields (GS10). Further, both standard and fractional cointegration tests indicate the existence of a long-run relationship between the two series.

Suggested Citation

  • Juan Diego Cafferata Salazar & Guglielmo Maria Caporale & Luis Alberiko Gil-Alana, 2026. "Persistence and Long-Run Linkages Between US Stock Market Prices and Bond Yields," CESifo Working Paper Series 12649, CESifo.
    • Handle: RePEc:ces:ceswps:_12649
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    Keywords

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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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