Government Bonds and the Cross-Section of Stock Returns
39 Pages Posted: 3 Nov 2008
There are 9 versions of this paper
Government Bonds and the Cross-Section of Stock Returns
Comovement and Predictability Relationships between Bonds and the Cross-Section of Stocks
Comovement and Predictability Relationships between Bonds and the Cross-Section of Stocks
Comovement and Predictability Relationships between Bonds and the Cross-Section of Stocks
Government Bonds and the Cross-Section of Stock Returns
Comovement and Predictability Relationships between Bonds and the Cross-Section of Stocks
Comovement and Predictability Relationships between Bonds and Thecross-Section of Stocks
Comovement and Predictability Relationships between Bonds and the Cross-Section of Stocks
Government Bonds and the Cross-Section of Stock Returnsâæ
Date Written: July 2005
Abstract
We document that U.S. government bonds comove more strongly with “bond-like stocks” stocks of large, mature, low-volatility, profitable, dividend-paying firms that are neither high growth nor distressed. This pattern may be caused by common shocks to real cash flows, rationally required returns, or flights to quality in which drops in investor sentiment increase the demand for both government bonds and bond-like stocks. Consistent with both the required returns and sentiment channels, we find a common predictable component in bonds and bondlike stocks. Consistent with the sentiment channel, we find that bonds and bond-like stocks comove with inflows into government bond and conservative stock mutual funds.
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