Review of Finance Vol. 27 No. 5 2023
Macroeconomic News and Stock–Bond Comovement
Abstract
Covariances between aggregate stock returns and changes in bond yields change sign over time. Existing theories emphasize either time-varying properties of expected inflation or time-varying properties of real yields. Using revisions in survey forecasts as proxies for macroeconomic news, neither approach succeeds empirically. Inflation-centric models require much more news about expected future inflation than we observe from surveys. Real-centric models posit signs of covariances among macroeconomic news, changes in yields, and stock returns that do not match those in the data. In a nutshell, macroeconomic news appears to drive a substantial part of stock–bond comovement, but not in ways consistent with our theories.
- DOI
- 10.1093/rof/rfac066
- Volume
- 27
- Issue
- 5
- Pages
- 1859-1882
- Language
- en
- Sources
- openalex crossref