Dynamic linkages and Granger causality between short-term US corporate bond and stock markets
It is sought to investigate a possible long-run association and Granger causality between US stock and short-term corporate bond markets by applying the well-known cointegration and error-correction methodology. The unit root tests reveal that the rates of return from S&P 500 and short-term US corporate bond yields are non-stationary in levels. The ADF test finds them cointegrated at 1, 5 and 10% levels of significance. The estimated error-correction model confirms a long-run relationship between these two markets. The short-term US corporate bond market appears to Granger-cause the US stock market in the long run. Furthermore, there appears to be a two-way short-run Granger causality and reversible feedback between these two markets.
Year of publication: |
1997
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Authors: | Rahman, Matiur ; Mustafa, Muhammad |
Published in: |
Applied Economics Letters. - Taylor & Francis Journals, ISSN 1350-4851. - Vol. 4.1997, 2, p. 89-91
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Publisher: |
Taylor & Francis Journals |
Saved in:
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