Reference : Market fragility and the paradox of the recent stock-bond dissonance
Scientific journals : Article
Business & economic sciences : Finance
Finance
http://hdl.handle.net/10993/34363
Market fragility and the paradox of the recent stock-bond dissonance
English
Koulovatianos, Christos mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
Li, Jian mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA)]
Weber, Fabienne mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
Jan-2018
Economics Letters
Elsevier Science
162
162-166
Yes (verified by ORBilu)
0165-1765
[en] Asset pricing ; Disaster risk ; Price–dividend ratio ; Bond returns
[en] After the Lehman-Brothers collapse, the stock index has exceeded its pre-Lehman-Brothers peak by 36% in real terms. Seemingly, markets have been demanding more stocks instead of bonds. Yet, instead of observing higher bond rates, paradoxically, bond rates have been persistently negative after the Lehman-Brothers collapse. To explain this paradox, we suggest that, in the post-Lehman-Brothers period, investors changed their perceptions on disasters, thinking that disasters occur once every 30 years on average, instead of disasters occurring once every 60 years. In our asset-pricing calibration exercise, this rise in perceived market fragility alone can explain the drop in both bond rates and price–dividend ratios observed after the Lehman-Brothers collapse, which indicates that markets mostly demanded bonds instead of stocks.
Researchers ; Professionals ; Students
http://hdl.handle.net/10993/34363
10.1016/j.econlet.2017.11.022
FnR ; FNR11290863 > Weber Fabienne > BANKMONEY > Banks And Money Markets > 01/12/2016 > 30/11/2019 > 2016

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