Modeling the conditional correlation between United States stock and bond returns

Wal, M. van der (2008) Modeling the conditional correlation between United States stock and bond returns. Bachelor's Thesis, Mathematics.

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Abstract

This paper investigates the intertemporal interaction between returns on the S&P 500 index and the Lehman US Aggregate Bond index using daily data from 6 May 1988 until 8 May 2008. We allow the conditional covariance matrix to vary over time, according to the bivariate BEKK GARCH(1,1) model. The results indicate that our estimated conditional correlation varies considerably over time. Based on several test statistics, we can conclude that it is a statistically adequate representation of the dataseries. Finally, we investigate how the interest rate is related to our estimated conditional correlation and find that they are positively related.

Item Type:	Thesis (Bachelor's Thesis)
Supervisor name:	Spierdijk, L.
Degree programme:	Mathematics
Thesis type:	Bachelor's Thesis
Language:	English
Date Deposited:	15 Feb 2018 07:28
Last Modified:	17 Apr 2019 12:32
URI:	https://fse.studenttheses.ub.rug.nl/id/eprint/8436

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