Testing for asymmetric correlations between US sector returns and interest rate changes

This research examines potential asymmetric interactions between interest rate changes and sector returns in the US, focusing on some of the major economic and geopolitical events over recent years, such as the COVID-19 pandemic and the Russia–Ukraine conflict. These events have triggered political...

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Autores: Jareño Cebrián, Francisco, González Pérez, María de la O, Almansa, Jose María
Tipo de recurso: artículo
Fecha de publicación:2025
País:España
Institución:Universidad de Castilla-La Mancha
Repositorio:RUIdeRA. Repositorio Institucional de la UCLM
OAI Identifier:oai:ruidera.uclm.es:10578/46278
Acceso en línea:https://doi.org/10.1142/S2010495225500186
https://www.worldscientific.com/doi/10.1142/S2010495225500186
https://hdl.handle.net/10578/46278
Access Level:acceso abierto
Palabra clave:Crisis periods
Interest rates
NARDL
US sector returns
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spelling Testing for asymmetric correlations between US sector returns and interest rate changesJareño Cebrián, FranciscoGonzález Pérez, María de la OAlmansa, Jose MaríaCrisis periodsInterest ratesNARDLUS sector returnsThis research examines potential asymmetric interactions between interest rate changes and sector returns in the US, focusing on some of the major economic and geopolitical events over recent years, such as the COVID-19 pandemic and the Russia–Ukraine conflict. These events have triggered political and economic responses that have deeply affected financial markets. Using the Nonlinear Autoregressive Distributed Lag (NARDL) methodology, the study focuses on 11 sector indices of the S&P 500. It also decomposes nominal interest rates into their real interest rate and inflation expectation components. The analysis covers the period from April 7, 2019 to April 28, 2024, dividing the sample into two distinct sub-periods characterized by declining and rising interest rates, respectively, for robustness purposes. The results reveal several key findings. First, the sensitivity of sector returns is sector-, model- and period-dependent. Second, disaggregating nominal interest rates into inflation expectations and real interest rates significantly improves the analysis of US stock market dynamics at the sector level. Inflation expectations are found to be positively correlated with sector returns, whereas real interest rates tend to have a negative effect. Third, short-term asymmetries in shifts in interest rates and inflation expectations have a significant impact on the US stock market. Finally, the explanatory power of the model is significantly stronger in the first sub-period, which is characterized by declining and low interest rates and the economic impact of the COVID-19 crisis. These results have important implications for portfolio managers and other financial market participants.World Scientific202620262025info:eu-repo/semantics/articleapplication/pdfapplication/pdfhttps://doi.org/10.1142/S2010495225500186https://www.worldscientific.com/doi/10.1142/S2010495225500186https://hdl.handle.net/10578/46278reponame:RUIdeRA. Repositorio Institucional de la UCLMinstname:Universidad de Castilla-La ManchaEspañolPID2021-128829NB-100SBPLY/21/180501/0000862025-GRIN-38406info:eu-repo/semantics/openAccessoai:ruidera.uclm.es:10578/462782026-05-27T07:36:41Z
dc.title.none.fl_str_mv Testing for asymmetric correlations between US sector returns and interest rate changes
title Testing for asymmetric correlations between US sector returns and interest rate changes
spellingShingle Testing for asymmetric correlations between US sector returns and interest rate changes
Jareño Cebrián, Francisco
Crisis periods
Interest rates
NARDL
US sector returns
title_short Testing for asymmetric correlations between US sector returns and interest rate changes
title_full Testing for asymmetric correlations between US sector returns and interest rate changes
title_fullStr Testing for asymmetric correlations between US sector returns and interest rate changes
title_full_unstemmed Testing for asymmetric correlations between US sector returns and interest rate changes
title_sort Testing for asymmetric correlations between US sector returns and interest rate changes
dc.creator.none.fl_str_mv Jareño Cebrián, Francisco
González Pérez, María de la O
Almansa, Jose María
author Jareño Cebrián, Francisco
author_facet Jareño Cebrián, Francisco
González Pérez, María de la O
Almansa, Jose María
author_role author
author2 González Pérez, María de la O
Almansa, Jose María
author2_role author
author
dc.subject.none.fl_str_mv Crisis periods
Interest rates
NARDL
US sector returns
topic Crisis periods
Interest rates
NARDL
US sector returns
description This research examines potential asymmetric interactions between interest rate changes and sector returns in the US, focusing on some of the major economic and geopolitical events over recent years, such as the COVID-19 pandemic and the Russia–Ukraine conflict. These events have triggered political and economic responses that have deeply affected financial markets. Using the Nonlinear Autoregressive Distributed Lag (NARDL) methodology, the study focuses on 11 sector indices of the S&P 500. It also decomposes nominal interest rates into their real interest rate and inflation expectation components. The analysis covers the period from April 7, 2019 to April 28, 2024, dividing the sample into two distinct sub-periods characterized by declining and rising interest rates, respectively, for robustness purposes. The results reveal several key findings. First, the sensitivity of sector returns is sector-, model- and period-dependent. Second, disaggregating nominal interest rates into inflation expectations and real interest rates significantly improves the analysis of US stock market dynamics at the sector level. Inflation expectations are found to be positively correlated with sector returns, whereas real interest rates tend to have a negative effect. Third, short-term asymmetries in shifts in interest rates and inflation expectations have a significant impact on the US stock market. Finally, the explanatory power of the model is significantly stronger in the first sub-period, which is characterized by declining and low interest rates and the economic impact of the COVID-19 crisis. These results have important implications for portfolio managers and other financial market participants.
publishDate 2025
dc.date.none.fl_str_mv 2025
2026
2026
dc.type.none.fl_str_mv info:eu-repo/semantics/article
format article
dc.identifier.none.fl_str_mv https://doi.org/10.1142/S2010495225500186
https://www.worldscientific.com/doi/10.1142/S2010495225500186
https://hdl.handle.net/10578/46278
url https://doi.org/10.1142/S2010495225500186
https://www.worldscientific.com/doi/10.1142/S2010495225500186
https://hdl.handle.net/10578/46278
dc.language.none.fl_str_mv Español
language_invalid_str_mv Español
dc.relation.none.fl_str_mv PID2021-128829NB-100
SBPLY/21/180501/000086
2025-GRIN-38406
dc.rights.none.fl_str_mv info:eu-repo/semantics/openAccess
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
application/pdf
dc.publisher.none.fl_str_mv World Scientific
publisher.none.fl_str_mv World Scientific
dc.source.none.fl_str_mv reponame:RUIdeRA. Repositorio Institucional de la UCLM
instname:Universidad de Castilla-La Mancha
instname_str Universidad de Castilla-La Mancha
reponame_str RUIdeRA. Repositorio Institucional de la UCLM
collection RUIdeRA. Repositorio Institucional de la UCLM
repository.name.fl_str_mv
repository.mail.fl_str_mv
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