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Dynamic relationship between Stock and Bond returns: A GAS MIDAS copula approach
Örebro University, Örebro University School of Business.ORCID iD: 0000-0002-0682-8584
Department of Statistics, Lund University, Lund, Sweden.
2023 (English)In: Journal of Empirical Finance, ISSN 0927-5398, E-ISSN 1879-1727, Vol. 73, p. 272-292Article in journal (Refereed) Published
Abstract [en]

Stock and bond are the two most crucial assets for portfolio allocation and risk management. This study proposes generalized autoregressive score mixed frequency data sampling (GAS MIDAS) copula models to analyze the dynamic dependence between stock returns and bond returns. A GAS MIDAS copula decomposes their relationship into a short-term dependence and a long-term dependence. While the long-term dependence is driven by related macro-finance factors using a MIDAS regression, the short-term effect follows a GAS process. Asymmetric dependence at different quantiles is also taken into account. We find that the proposed GAS MIDAS copula models are more effective in optimal portfolio allocation and improve the accuracy in risk management compared to other alternatives.

Place, publisher, year, edition, pages
Elsevier, 2023. Vol. 73, p. 272-292
Keywords [en]
Asymmetry, GAS copulas, MIDAS
National Category
Economics
Identifiers
URN: urn:nbn:se:oru:diva-110196DOI: 10.1016/j.jempfin.2023.07.004ISI: 001147930800001Scopus ID: 2-s2.0-85167835270OAI: oai:DiVA.org:oru-110196DiVA, id: diva2:1819112
Funder
Swedish Research Council, 2022-06725The Jan Wallander and Tom Hedelius Foundation, BV18-0018; BFV22-0005Available from: 2023-12-13 Created: 2023-12-13 Last updated: 2024-02-08Bibliographically approved

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Nguyen, Hoang

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