The lead-lag relation between the stock and the bond markets

Tolikas, Konstantinos (2017). The lead-lag relation between the stock and the bond markets. European Journal of Finance , pp. 1-21.

Abstract

I examine the relative informational efficiency of bonds and the underlying stocks through the lead-lag relation between their daily returns. I find that stock returns lead the returns of high yield bonds but not those of investment grade bonds, which indicates that the stock market is relatively more informational efficient than the bond market. The findings imply trading opportunities for the bonds that are highly sensitive to the release of new information. I also find that stocks detect impending defaults earlier than bonds, which implies that bond holders may have enough time to protect their capital.

Publication DOI: https://doi.org/10.1080/1351847X.2017.1340320
Divisions: Aston Business School > Economics finance & entrepreneurship
Additional Information: © 2017 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited, and is not altered, transformed, or built upon in any way
Uncontrolled Keywords: nformational efficiency; corporate bonds; lead-lag relation JEL Classification: G12; G14
Full Text Link: https://www.tan ... 7X.2017.1340320
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Published Date: 2017-06-19
Published Online Date: 2017-06-19
Authors: Tolikas, Konstantinos ( 0000-0001-8281-0709)

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