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Determinants of the Greek stock-bond correlation

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  • Petros M Migiakis

    (Bank of Greece)

Abstract

The stock-bond correlation has been related to market uncertainty and macroeconomic variables. In this paper, we focus on the common pricing process of Greek stocks and bonds, through the correlation of their returns. We derive dynamic conditional correlations of Greek stock and government bond returns, covering the period 1999-2009. We find that the dynamics of the Greek stock-bond correlation are explained by several risk factors, related to liquidity and market’s uncertainty while being subject to spill over effects. Focusing on the recent credit crisis and decoupling effects between stock and bond returns, we find a relation between decoupling effects and market uncertainty and contagion from the Italian market.

Suggested Citation

  • Petros M Migiakis, 2010. "Determinants of the Greek stock-bond correlation," Economic Bulletin, Bank of Greece, issue 33, pages 79-90, May.
    • Handle: RePEc:bog:econbl:y:2010:i:33:p:79-90
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    References listed on IDEAS

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    More about this item

    Keywords

    Stock-bond correlation; DCC-GARCH; determinants; risk; contagion;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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