Main driving factors of the interest rate-stock market Granger causality

This paper investigates the causal relationship between changes in the 10-year Treasury bond yield and the S&P 500 stock return in the United Sates with emphasis on time variation, stress factors and smooth regime transition. First, the time-varying Granger causality test proposed by Lu et al. (...

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Autores: Jammazi, Rania, Ferrer Lapeña, Román, Jareño Cebrián, Francisco, Hammoudeh, Shawkat M.
Tipo de recurso: artículo
Fecha de publicación:2017
País:España
Institución:Universidad de Castilla-La Mancha
Repositorio:RUIdeRA. Repositorio Institucional de la UCLM
OAI Identifier:oai:ruidera.uclm.es:10578/15073
Acceso en línea:http://hdl.handle.net/10578/15073
Access Level:acceso embargado
Palabra clave:Interest rates
Stock returns
Smooth transition regressions
Time-varying Granger causality
Financial stress indices
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spelling Main driving factors of the interest rate-stock market Granger causalityJammazi, RaniaFerrer Lapeña, RománJareño Cebrián, FranciscoHammoudeh, Shawkat M.Interest ratesStock returnsSmooth transition regressionsTime-varying Granger causalityFinancial stress indicesThis paper investigates the causal relationship between changes in the 10-year Treasury bond yield and the S&P 500 stock return in the United Sates with emphasis on time variation, stress factors and smooth regime transition. First, the time-varying Granger causality test proposed by Lu et al. (2014) is applied. Then a two-regime multifactor smooth transition regression model with a single transition variable representing a wide range of macroeconomic and financial variables is estimated in order to identify the key explanatory factors governing the causal relationship. The results show a significant bidirectional causal relationship over most of the study period, mainly due to the strong simultaneous interactions between the bond interest rate and the stock returns, and the causal link has strengthened since the beginning of the U.S. sub-prime crisis in the summer of 2007. Moreover, the U.S. financial stress indices seem to play a key role in explaining the dynamics of the causal relationship between the long-term interest rates and the stock returns, especially during the recent global financial crisis.Elsevier201720172017info:eu-repo/semantics/articleapplication/pdfapplication/pdfhttp://hdl.handle.net/10578/15073reponame:RUIdeRA. Repositorio Institucional de la UCLMinstname:Universidad de Castilla-La ManchaInglésinfo:eu-repo/semantics/embargoedAccessoai:ruidera.uclm.es:10578/150732026-05-27T07:36:41Z
dc.title.none.fl_str_mv Main driving factors of the interest rate-stock market Granger causality
title Main driving factors of the interest rate-stock market Granger causality
spellingShingle Main driving factors of the interest rate-stock market Granger causality
Jammazi, Rania
Interest rates
Stock returns
Smooth transition regressions
Time-varying Granger causality
Financial stress indices
title_short Main driving factors of the interest rate-stock market Granger causality
title_full Main driving factors of the interest rate-stock market Granger causality
title_fullStr Main driving factors of the interest rate-stock market Granger causality
title_full_unstemmed Main driving factors of the interest rate-stock market Granger causality
title_sort Main driving factors of the interest rate-stock market Granger causality
dc.creator.none.fl_str_mv Jammazi, Rania
Ferrer Lapeña, Román
Jareño Cebrián, Francisco
Hammoudeh, Shawkat M.
author Jammazi, Rania
author_facet Jammazi, Rania
Ferrer Lapeña, Román
Jareño Cebrián, Francisco
Hammoudeh, Shawkat M.
author_role author
author2 Ferrer Lapeña, Román
Jareño Cebrián, Francisco
Hammoudeh, Shawkat M.
author2_role author
author
author
dc.subject.none.fl_str_mv Interest rates
Stock returns
Smooth transition regressions
Time-varying Granger causality
Financial stress indices
topic Interest rates
Stock returns
Smooth transition regressions
Time-varying Granger causality
Financial stress indices
description This paper investigates the causal relationship between changes in the 10-year Treasury bond yield and the S&P 500 stock return in the United Sates with emphasis on time variation, stress factors and smooth regime transition. First, the time-varying Granger causality test proposed by Lu et al. (2014) is applied. Then a two-regime multifactor smooth transition regression model with a single transition variable representing a wide range of macroeconomic and financial variables is estimated in order to identify the key explanatory factors governing the causal relationship. The results show a significant bidirectional causal relationship over most of the study period, mainly due to the strong simultaneous interactions between the bond interest rate and the stock returns, and the causal link has strengthened since the beginning of the U.S. sub-prime crisis in the summer of 2007. Moreover, the U.S. financial stress indices seem to play a key role in explaining the dynamics of the causal relationship between the long-term interest rates and the stock returns, especially during the recent global financial crisis.
publishDate 2017
dc.date.none.fl_str_mv 2017
2017
2017
dc.type.none.fl_str_mv info:eu-repo/semantics/article
format article
dc.identifier.none.fl_str_mv http://hdl.handle.net/10578/15073
url http://hdl.handle.net/10578/15073
dc.language.none.fl_str_mv Inglés
language_invalid_str_mv Inglés
dc.rights.none.fl_str_mv info:eu-repo/semantics/embargoedAccess
eu_rights_str_mv embargoedAccess
dc.format.none.fl_str_mv application/pdf
application/pdf
dc.publisher.none.fl_str_mv Elsevier
publisher.none.fl_str_mv Elsevier
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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