Realized Bond-Stock Correlation: Macroeconomic Announcement Effects
Charlotte Christiansen and Angelo Ranaldo
G12, G13, G14
Bond-stock correlation, Macroeconomic announcements, Realized correlation, Realized volatility
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.