Time-Varying Market Integration and Stock and Bond Return Concordance in Emerging Markets
Author | : Valentyn Panchenko |
Publisher | : |
Total Pages | : |
Release | : 2011 |
Genre | : |
ISBN | : |
Download Time-Varying Market Integration and Stock and Bond Return Concordance in Emerging Markets Book in PDF, ePub and Kindle
We investigate the extent to which emerging stock market integration affects the joint behavior of stock and bond returns using a two-stage semi-parametric approach. Using a sample of 18 emerging markets, we find an unambiguous and robust link between emerging stock market integration and stock-bond return decoupling. We explain this with a decline in the segmentation risk premia in equities modeled by De Jong and De Roon [J. Fin. Econ. 78 (2005) 583] that leads to increased demand for stocks and reduced or unchanged demand for bonds. Our findings deliver new insights into the financial liberalization and stock-bond comovement literatures.