Nonlinearity and Flight-to-Safety in the Risk-Return Trade-Off for Stocks and Bonds

• 成果类型: Article
• 署名作者: Adrian, Tobias; Crump, Richard K.; Vogt, Erik
• 署名单位: International Monetary Fund; Federal Reserve System - USA; Federal Reserve Bank - New York
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12776
• 发表日期: 2019
• 页码: 1931-1973
• 关键词: long-run; liquidity; regressions; CONVERGENCE; asymptotics; QUALITY; premium; prices; tests

摘要

We document a highly significant, strongly nonlinear dependence of stock and bond returns on past equity market volatility as measured by the VIX. We propose a new estimator for the shape of the nonlinear forecasting relationship that exploits variation in the cross-section of returns. The nonlinearities are mirror images for stocks and bonds, revealing flight-to-safety: expected returns increase for stocks when volatility increases from moderate to high levels while they decline for Treasuries. These findings provide support for dynamic asset pricing theories in which the price of risk is a nonlinear function of marketvolatility.