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    Do long-term bonds hedge equity risk? Evidence from Spain. Working Paper N275-16


    Flavin, Thomas and Lagoa-Varela, Dolores (2016) Do long-term bonds hedge equity risk? Evidence from Spain. Working Paper N275-16. Working Paper. Economics, Finance and Accounting Department, Maynooth University.

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    Abstract

    We analyze the relationship between returns on equity and long-term government bonds in the Spanish economy. In particular, we are interested in the stability of the relationship across differing market conditions and if long-term bonds deliver diversification benefits during periods of equity market turbulence. Employing a Markov-switching vector autoregression model with three regimes, we find that the Spanish stock-bond relationship varies across market conditions and is positively correlated during ‘Bear’ markets. A sectoral analysis reveals that two sectors – Financials and Oil & Gas – are responsible for this positive comovement with the former being relatively more important.

    Item Type: Monograph (Working Paper)
    Additional Information: Cite as: Thomas Flavin & Dolores Lagoa-Varela, 2016. "Do long-term bonds hedge equity risk? Evidence from Spain," Economics, Finance and Accounting Department Working Paper Series N275-16.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
    Keywords: Stock-bond relationship; diversification; Spanish financial markets;
    Academic Unit: Faculty of Social Sciences > School of Business
    Item ID: 13573
    Depositing User: Thomas Flavin
    Date Deposited: 12 Nov 2020 16:46
    Publisher: Economics, Finance and Accounting Department, Maynooth University
    URI:

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