+7 925 966 4690, 9am6pm (GMT+3), Monday – Friday
ИД «Финансы и кредит»

JOURNALS

  

FOR AUTHORS

  

SUBSCRIBE

    
Financial Analytics: Science and Experience
 

Relationship between the Russian markets of stocks and governmental bonds

Vol. 9, Iss. 36, SEPTEMBER 2016

PDF  Article PDF Version

Received: 15 August 2016

Received in revised form: 29 August 2016

Accepted: 12 September 2016

Available online: 29 September 2016

Subject Heading: ECONOMIC AND STATISTICAL RESEARCH

JEL Classification: E61, H63

Pages: 2-15

Gilenko E.V. Saint Petersburg State University, St. Petersburg, Russian Federation
e.gilenko@gsom.pu.ru

Kuznetsov A.A. Cbonds Group, St. Petersburg, Russian Federation
a.kuznetsov-spb@mail.ru

Importance Currently, the existing economic situation abruptly made the Russian Ministry of Finance borrow funds in the domestic market through the federal loan bonds. The research examines the Russian markets of stocks and government bonds.
Objectives The research investigates the relationship of the current trends in the Russian markets of stocks and government bonds by analyzing what specifically makes this relationship so tight, and verifies hypotheses stating that the relationship implies effects of spillover, contagion and pursuit of quality.
Methods The research draws upon methods of the rolling correlation coefficient and dynamic conditional correlation for multivariate GARCH-models. Both methods are used to consider a correlation of trends in the Russian market of stocks and government bonds that change through time.
Results Relying upon estimates of the rolling correlation coefficients and two-dimensional DCC-GARCH model of dynamic correlations for the markets in question, we demonstrated that their relationship is unstable in terms of time, with only two of three effects being present.
Conclusions and Relevance The relationship between markets of stocks and government bonds changes through time and gets more intensive due to expectations of positive changes in the Russian economy. In addition, the relationship has a mutual spillover effect, i.e. two markets and their trends influence one another, and an effect of quality pursuits.

Keywords: Russian stock market, government bonds, rolling correlation coefficient, DCC-GARCH mode

References:

  1. Baur D.G., Lucey B.M. Flights and Contagion – An Empirical Analysis of Stock-Bond Correlations. Journal of Financial Stability, 2009, vol. 5, iss. 4, pp. 339–352. doi: 10.1016/j.jfs.2008.08.001
  2. Barsky R.B. Why Don't the Prices of Stocks and Bonds Move Together? American Economic Review, 1989, vol. 79, no. 5, pp. 1132–1145. doi: 10.3386/w2047
  3. Beltratti A., Shiller R.J. Stock Prices and Bond Yields: Can Their Co-Movements Be Explained in Terms of Present Value Models? Journal of Monetary Economics, 1992, vol. 30, pp. 25–46. doi: 10.1016/0304-3932(92)90042-Z
  4. Fleming J., Kirby C., Ostdiek B. Information and Volatility Linkages in the Stock, Bond, and Money Markets. Journal of Financial Economics, 1998, vol. 49, no. 1, pp. 111–137. doi: 10.1016/S0304-405X(98)00019-1
  5. Bekaert G., Grenadier S.R. Stock and Bond Pricing in an Affine Economy. NBER Working Paper, 1999, no. 7346. doi: 10.3386/w7346
  6. Connolly R., Stivers C., Sun L. Stock Market Uncertainty and the Stock-Bond Return Relation. The Journal of Financial and Quantitative Analysis, 2005, vol. 40, no. 1, pp. 161–194. doi: 10.1017/S0022109000001782
  7. David A., Veronesi P. Inflation and Earnings Uncertainty and Volatility Forecasts: A Structural Form Approach. Chicago GSB Research Paper. University of Calgary, 2008. doi: 10.2139/ssrn.507122
  8. Li L. Macroeconomic Factors and the Correlation of Stock and Bond Returns. Yale International Center for Finance, Working Paper, 2002, no. 02-46.
  9. Yang J., Zhou Y.J., Wang Z.J. The Stock-Bond Correlation and Macroeconomic Conditions: One and a Half Centuries of Evidence. Journal of Banking & Finance, 2009, vol. 33, iss. 4, pp. 670–680. doi: 10.1016/j.jbankfin.2008.11.010
  10. Ilmanen А. Stock–Bond Correlations. Journal of Fixed Income, 2003, vol. 13, no. 2, pp. 55–66. doi: 10.3905/jfi.2003.319353
  11. D'Addona S., Kind A.H. International Stock-Bond Correlations in a Simple Affine Asset Pricing Model. Journal of Banking & Finance, 2006, vol. 30, iss. 10, pp. 2747–2765. doi: 10.1016/j.jbankfin.2005.10.007
  12. Gebhardt W.R., Hvidkjaer S., Swaminathan B. Stock and Bond Market Interaction: Does Momentum Spill Over? Journal of Financial Economics, 2005, vol. 75, iss. 3, pp. 651–690. doi: 10.1016/j.jfineco.2004.03.005
  13. Andersson M., Krylova E., Vahamaa S. Why Does the Correlation Between Stock and Bond Returns Vary Over Time? Applied Financial Economics, 2004, vol. 18, iss. 2. pp. 139–151. doi: 10.1080/09603100601057854
  14. Panchenko V., Wu E. Time-Varying Market Integration and Stock and Bond Return Concordance in Emerging Markets. Journal of Banking & Finance, 2009, vol. 33, iss. 6, pp. 1014–1021. doi: 10.1016/j.jbankfin.2008.10.016
  15. Christopher R., Kim S.-J., Wu E. Do Sovereign Credit Ratings Influence Regional Stock and Bond Market Interdependencies in Emerging Countries? Journal of International Financial Markets, Institutions and Money, 2012, vol. 22, iss. 4, pp. 1070–1089. doi: 10.1016/j.intfin.2012.01.003
  16. Bianconi M., Yoshino J.A., Machado de Sousa M.O. BRIC and the U.S. Financial Crisis: An Empirical Investigation of Stock and Bond Markets. Emerging Markets Review, 2013, vol. 14, iss. 1, pp. 76–109. doi: 10.1016/j.ememar.2012.11.002
  17. Kolluri B., Wahab S., Wahab M. An Examination of Co-Movements of India's Stock and Government Bond Markets. Journal of Asian Economics, 2015, vol. 41, pp. 39–56. doi: 10.1016/j.asieco.2015.10.001
  18. Saleem K. Time Varying Correlations between Stock and Bond Returns: Empirical Evidence from Russia. Asian Journal of Finance & Accounting, 2011, vol. 3, no. 1. doi: 10.5296/ajfa.v3i1.989
  19. Engle R. Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models. Journal of Business & Economic Statistics, 2002, vol. 20, iss. 3, pp. 339–350. doi: 10.2307/1392121
  20. Hull J. Options, Futures, and Other Derivatives. Upper Saddle River, Prentice Hall, 2012, p. 841.
  21. Engle R. Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation. Econometrica, 1982, vol. 50, no. 4, pp. 987–1008. doi: 10.2307/1912773
  22. Fedorova E.A., Gilenko E.V. [A comparative analysis of approaches to evaluating calendar anomalies in the stock market]. Audit i finansovyi analiz = Audit and Financial Analysis, 2008, no. 5, pp. 184–189. (In Russ.)

View all articles of issue

 

ISSN 2311-8768 (Online)
ISSN 2073-4484 (Print)

Journal current issue

Vol. 17, Iss. 1
March 2024

Archive