TESTING FOR LINEAR AND NON-LINEAR GRANGER NON-CAUSALITY HYPOTHESIS BETWEEN STOCK AND BOND: THE CASES OF MALAYSIA AND SINGAPORE
The untested assumption of linear relationship between stocks and bonds in previous empirical studies may lead to an invalid conclusion if the actual relationship is non-linear. The emphasis of this paper is on the effect of non-linearities on causal relationships between stocks and bonds in the cas...
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| Published in | Singapore economic review Vol. 59; no. 5; p. 1 |
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| Main Authors | , |
| Format | Journal Article |
| Language | English |
| Published |
Singapore
World Scientific Publishing Co. Pte., Ltd
01.12.2014
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| Subjects | |
| Online Access | Get full text |
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| Abstract | The untested assumption of linear relationship between stocks and bonds in previous empirical studies may lead to an invalid conclusion if the actual relationship is non-linear. The emphasis of this paper is on the effect of non-linearities on causal relationships between stocks and bonds in the cases of Malaysia and Singapore. Results from linearity tests indicate the existence of non-linearities in the dynamic relationship between stocks and bonds. Non-linear causality test results based on Taylor expansion suggest that non-linear causality flows from stocks to bonds and vice versa. The test further confirms that bonds with different maturity dates have different relationships with stocks. |
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| AbstractList | The untested assumption of linear relationship between stocks and bonds in previous empirical studies may lead to an invalid conclusion if the actual relationship is non-linear. The emphasis of this paper is on the effect of non-linearities on causal relationships between stocks and bonds in the cases of Malaysia and Singapore. Results from linearity tests indicate the existence of non-linearities in the dynamic relationship between stocks and bonds. Non-linear causality test results based on Taylor expansion suggest that non-linear causality flows from stocks to bonds and vice versa. The test further confirms that bonds with different maturity dates have different relationships with stocks. |
| Author | Ho, Chong Mun Ong, Sheue Li |
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| Copyright | Copyright World Scientific Publishing Co. Pte., Ltd. Dec 2014 |
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| SubjectTerms | Bonds Causality Economic models Economic theory Maturity Stocks Studies |
| Title | TESTING FOR LINEAR AND NON-LINEAR GRANGER NON-CAUSALITY HYPOTHESIS BETWEEN STOCK AND BOND: THE CASES OF MALAYSIA AND SINGAPORE |
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