The economic value of volatility transmission between the stock and bond markets

This study has two main objectives. Firstly, volatility transmission between stocks and bonds in European markets is studied using the two most important financial assets in these fields: the DJ Euro Stoxx 50 index futures contract and the Euro Bund futures contract. Secondly, a trading rule for the...

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Bibliographic Details
Published inThe journal of futures markets Vol. 28; no. 11; pp. 1066 - 1094
Main Authors Chuliá, Helena, Torró, Hipòlit
Format Journal Article
LanguageEnglish
Published Hoboken Wiley Subscription Services, Inc., A Wiley Company 01.11.2008
Wiley Periodicals Inc
Subjects
Asset allocation
Bond market
Capital market theory
Economic impact
Eurobonds
Futures
Mathematical finance
Portfolio management
Stock exchange
Stock index futures
Studies
Transmission mechanism
Volatility
Europe
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Summary:This study has two main objectives. Firstly, volatility transmission between stocks and bonds in European markets is studied using the two most important financial assets in these fields: the DJ Euro Stoxx 50 index futures contract and the Euro Bund futures contract. Secondly, a trading rule for the major European futures contracts is designed. This rule can be applied to different markets and assets to analyze the economic significance of volatility spillovers observed between them. The results indicate that volatility spillovers take place in both directions and that the stock‐bond trading rule offers very profitable returns after transaction costs. These results have important implications for portfolio management and asset allocation. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:1066–1094, 2008
Bibliography:ark:/67375/WNG-0M8X78CG-Q
istex:24A1B7A01D3F86FFDB98D5872611B7DBE44B84C7
ArticleID:FUT20342
ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0270-7314
1096-9934
DOI:10.1002/fut.20342