What Moves the Stock and Bond Markets? A Variance Decomposition for Long-Term Asset Returns

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What Moves the Stock and Bond Markets? A Variance Decomposition for Long-Term Asset Returns

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Title: What Moves the Stock and Bond Markets? A Variance Decomposition for Long-Term Asset Returns
Author: Ammer, John; Campbell, John

Note: Order does not necessarily reflect citation order of authors.

Citation: Campbell, John Y., and John Ammer. 1993. What moves the stock and bond markets? A variance decomposition for long-term asset returns. Journal of Finance 48(1): 3-37.
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Abstract: This paper uses a vector autoregressive model to decompose excess stock and 10-year bond returns into changes in expectations of future stock dividends, inflation, short-term real interest rates, and excess stock and bond returns. In monthly postwar U.S. data, stock and bond returns are driven largely by news about future excess stock returns and inflation, respectively. Real interest rates have little impact on returns, although they do affect the short-term nominal interest rate and the slope of the term structure. These findings help to explain the low correlation between excess stock and bond returns.
Published Version: http://dx.doi.org/10.2307/2328880
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:3382857

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  • FAS Scholarly Articles [6948]
    Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University
 
 

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