[en] This paper studies the dynamic correlation between stocks, between government
bonds and between stocks and bonds within the Euro-zone in the last decade. In
order to better understand the development of the financial market we argue that
it is necessary to analyse all such relations simultaneously rather than focus at one.
We firstly calculate the dynamic correlation for the previous asset classes. Results
presented at the asset-region level, i.e. north-stock, north-bonds, south-stocks and
south-bonds, visualise the divergence in integration in Europe and highlight the he-
terogeneity in these markets. Secondly, we study the macroeconomic factors that
determine these correlations. We find that, when we allow for regional division,
not only cross-asset correlations within regions behave differently from each other,
but also cross-assets cross-regions dynamic correlations can be explained with ma-
croeconomic factors such as the relative market uncertainty between countries and
balance of payments dynamics.
Disciplines :
Macroéconomie & économie monétaire
Auteur, co-auteur :
PEREGO, Erica ; University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) ; Université Catholique de Louvain - UCL > IRES > PhD student
VERMEULEN, Wessel ; University of Oxford > Department of economics > OXCARRE > Research fellow
Langue du document :
Anglais
Titre :
Macroeconomic determinants of European stock and government bond correlations: A tale of two regions
