The dynamics of bond yields and the stock index - With an application to the UK stock and bond market

Applied Financial Economics

Volumn 13, Issue 5, 2003, Pages 387-399

  Jakobsen, Jan Bo ^a   Sørensen, Carsten ^b  

^a Nordea Investment Management   (Denmark)

^b Department of International Economics and Management   (Denmark)

Author keywords

[No Author keywords available]

Indexed keywords

FINANCIAL MARKET; STOCK MARKET; YIELD;

UNITED KINGDOM;

EID: 0038661670     PISSN: 09603107     EISSN: None     Source Type: Journal    
DOI: 10.1080/096031002101388556     Document Type: Article

References (34)

1. Barsky, R. B. (1989) Why don't the prices of stocks and bonds move together, American Economic Review, 79, 1132-45.
2. Bakshi, G. S. and Chen, Z. C. (1997) An alternative valuation model for contingent claims, Journal of Financial Economics, 44, 123-65.
3. Breeden, D. T. (1979) An intertemporal asset pricing model with stochastic consumption and investment opportunities, Journal of Financial Economics, 7, 265-96.
4. Breeden, D. T. (1986) Consumption, production, inflation and interest rates: a synthesis, Journal of Financial Economics, 16, 3-39.
5. Campbell, J. Y. (1987) Stock returns and the term structure, Journal of Financial Economics, 18, 373-99.
6. Campbell, J. Y. and Shiller, R. J. (1989) The dividend-price ratio and expectations of future dividends and discount factors, Review of Financial Studies, 1, 195-228.
7. Campbell, J. Y. and Viceira, L. M. (2001) Who should buy long-term bonds?, American Economic Review, 91, 99-127.
8. Chen, R.-R. and Scott, L. (1993) Maximum likelihood estimation for a multifactor equilibrium model of the term structure of interest rates, Journal of Fixed Income, 3, 14-31.
9. Chen, R.-R. and Scott, L. (1996) Multi-factor Cox, Ingersoll and Ross models of the term structure: Estimates and tests from a Kalman filter model, Working Paper, University of Georgia.
10. Cox, J. C., Ingersoll, J. E. and Ross, S. A. (1985a) An intertemporal general equilibrium model of asset prices, Econometrica, 53, 363-84.
11. Cox, J. C., Ingersoll, J. E. and Ross, S. A. (1985b) A theory of the term structure of interest rates, Econometrica, 53, 385-407.
12. Duan, J.-C. and Simonato, J.-G. (1999) Estimating exponential-affine term structure models by Kalman filter, Review of Quantitative Finance and Accounting, 13, 111-35.
13. Duffie, J. D. (1996) Dynamic Asset Pricing Theory, 2nd edn, Princeton University Press, Princeton, New Jersey.
14. Fama, E. F. (1975) Short term interest rates as predictors of inflation, American Economic Review, 65, 269-82.
15. Fama, E. F. and Gibbons, M. (1982) Inflation, real returns and capital investment, Journal of Monetary Economics, 9, 297-324.
16. Fama, E. F. and French, K. R. (1989) Business conditions and expected returns on stocks and bonds, Journal of Financial Economics, 25, 23-49.
17. Fraser, P. (1995) UK stock and government bond markets: predictability and the term structure, Applied Financial Economics, 5, 61-7.
18. Geyer, A. L. J. and Pichler, S. (1999) A state-space approach to estimate and test multi-factor Cox-Ingersoll-Ross models of the term structure, Journal of Financial Research, 22, 107-30.
19. Goldstein, R. and Zapatero, F. (1996) General equilibrium with constant relative risk aversion and Vasicek interest rates, Mathematical Finance, 6, 331-40.
20. Harvey, A. C. (1989) Forecasting, Structural Time Series models and the Kalman Filter, Cambridge University Press, Cambridge.
21. Hirshleifer, J. (1970) Investment, Interest and Capital, Prentice-Hall, Englewood Cliffs, New Jersey.
22. Karatzas, I. and Shreve, S. E. (1988) Brownian Motion and Stochastic Calculus, Springer-Verlag, New York.
23. Langetieg, T. C. (1980) A multivariate model of the term structure, Journal of Finance, 35, 71-97.
24. Lucas, R. E. (1978) Asset prices in an exchange economy, Econometrica, 46, 1429-45.
25. Lund, J. (1994) Econometric analysis of continuous-time Gaussian models of the term structure of interest rates - with an application to the Danish bond market, Working Paper, Department of Information Science, The Aarhus School of Business, Denmark.
26. Merton, R. C. (1971) Optimum consumption and portfolio rules in a continuous-time model, Journal of Economic Theory, 3, 373-413.
27. Merton, R. C. (1973) An intertemporal capital asset pricing model, Econometrica, 41, 867-87.
28. Mishkin, F. (1981) The real rate of interest: an empirical investigation, Carnegie-Rochester Conference Series on Public Policy, 15, 151-200.
29. Pennacchi, G. G. (1991) Identifying the dynamics of real interest rates and inflation: Evidence using survey data, Review of Financial Studies, 4, 53-86.
30. Shiller, R. J. and Beltratti, A. E. (1992) Stock prices and bond yields: can their comovements be explained in terms of present value models?, Journal of Monetary Economics, 30, 25-46.
31. Sørensen, C. (1999a) Stock index dynamics and derivatives pricing with stochastic interest rates, Review of Derivatives Research, 2, 261-85.
32. Sørensen, C. (1999b) Dynamic asset allocation and fixed income management, Journal of Financial and Quantitative Analysis, 34, 513-31.
33. Svensson, L. E. O. (1994) Estimating and interpreting forward interest rates: Sweden 1992-94, IMF Working Paper No. 114, The International Monetary Fund.
34. Vasicek, O. A. (1977) An equilibrium characterization of the term structure, Journal of Financial Economics, 5, 177-88.