Title: Dynamic correlations of bond and equity futures and macroeconomic determinants: international evidence

Authors: Nikiforos Laopodis; Theophano Patra; Vassilis Thomas

Addresses: School of Business and Economics, Department of Finance, American College of Greece, 6 Gravias Street GR-153 42, Aghia Paraskevi, Athens, Greece ' School of Business and Economics, Department of Finance, American College of Greece, 6 Gravias Street GR-153 42, Aghia Paraskevi, Athens, Greece ' School of Business and Economics, Department of Finance, American College of Greece, 6 Gravias Street GR-153 42, Aghia Paraskevi, Athens, Greece

Abstract: This paper examines whether the dynamic co-movements between stock-bond futures markets may be driven by domestic and international macroeconomic factors. The empirical analysis also investigates whether economic uncertainty and geopolitical risks have an impact on the dynamic conditional correlations of bond and equity futures markets. The results pointed to significance of domestic inflation and industrial production, while the 3M USD Libor and 3M Euribor surfaced as determinants of the dynamic equity-bond futures correlations. Finally, the paper examines the impact of the pandemic on the dynamic correlations with the split of the sample in pre- and post-pandemic periods and it was found that neither the uncertainty nor the geopolitical risk indices emerged as statistically significant in any country.

Keywords: bond-equity futures; DCC-GARCH; macroeconomic variables; economic uncertainty indices; geopolitical risk.

DOI: 10.1504/IJFMD.2023.129096

International Journal of Financial Markets and Derivatives, 2023 Vol.9 No.1/2, pp.114 - 135

Received: 21 Aug 2022
Accepted: 20 Nov 2022
Published online: 17 Feb 2023 *