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Realized Bond-Stock Correlation: Macroeconomic Announcement Effects

Author

Listed:
  • Charlotte Christiansen
  • Angelo Ranaldo

Abstract

We investigate the effects of macroeconomic announcements on the realized correlation between bond and stock returns. Our results deliver insights into the dominating drivers of bond-stock comovements. We find that it is not so much the surprise component of the announcement, but the mere fact that an announcement occurs that influences the realized bond-stock correlation. The impact of macroeconomic announcements varies across the business cycle. Announcement effects are highly dependent on the sign of the realized bond-stock correlation which has recently gone from positive to negative. Macroeconomic announcement effects on realized bond and stock volatilities are also investigated.

Suggested Citation

  • Charlotte Christiansen & Angelo Ranaldo, 2006. "Realized Bond-Stock Correlation: Macroeconomic Announcement Effects," Working Papers 2006-02, Swiss National Bank.
    • Handle: RePEc:snb:snbwpa:2006-02
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    File URL: https://www.snb.ch/en/publications/research/working-papers/2006/working_paper_2006_02
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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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