Stock-Bond Return Dynamics and the Expected Country Stock Returns

• 成果类型: Article; Early Access
• 署名作者: Pyun, Sungjune
• 署名单位: Yonsei University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2024.07047
• 发表日期: 2025
• 关键词: stock-bond correlation; country stock market; country-specific risk

摘要

Stock and bond prices of a country move together with increasing country-specific risk. Bonds effectively hedge growth expectation risk when country-specific risk is low, resulting in a negative stock-bond correlation. However, as country-specific risk increases, hedging is less effective because (1) rising domestic prices tend to reduce a country's growth potential and (2) global growth expectation shocks are more persistent than country-specific ones. Consequently, countries with greater country-specific risk exhibit a relatively positive stock-bond correlation. Equity investments in these countries outperform those with negative relationships by 7%-11% annually. The superior performance is not driven by investing in a fixed set of countries.