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Advisor(s)
Abstract(s)
We employ a cross-quantilogram approach to assess relationships between quantiles of
stock returns and sovereign yields, in the U.S. and Germany, in the period 1990-2024.
Specifically, we focus on the lowest 5% quantile of stock returns and the highest 5%
quantile of bond returns, providing insights into tail dependencies, crucial during market
downturns and periods of heightened volatility. We also measure causality in volatilities
extending well-known approaches analyzing volatility transmission. We find significant
cross-market relationships between U.S. and German stock and bond markets, influenced
by economic crises, macroeconomic dynamics, and monetary policy interventions, and
financial stress play a crucial role.
Description
Keywords
Stock returns Sovereign bond returns Stock-bond relationship Crossquantilogram Volatility transmission US Germany Monetary policy Shocks Fiscal stance
Pedagogical Context
Citation
Afonso, António, José Alves, Wojciech Grabowski e Sofia Monteiro (2025). "Stock and sovereign returns linkages: time-varying causality and extreme-quantile determinants". REM Working paper series, nº 0366/2025
Publisher
ISEG - REM (Research in Economics and Mathematics)