P. Gomes
In search of the determinants of European asset market comovements
Gomes, P.; Taamouti, A.
Abstract
We show, in a broad class of affine general equilibrium models with long-run risk, that the covariances between asset returns are linear functions of risk factors. We use a dynamic conditional correlation model to measure the covariances of stock and sovereign bond markets in the Euro Area. We use a new approach to measure risk factors based on Google search data. The factors explain 50 to 60% of the variation of the covariances between European stocks and 25 to 35% of the covariances between European bonds. The information improves the portfolio performance compared to an equally weighted portfolio.
Citation
Gomes, P., & Taamouti, A. (2016). In search of the determinants of European asset market comovements. International Review of Economics and Finance, 44, 103-117. https://doi.org/10.1016/j.iref.2016.03.005
Journal Article Type | Article |
---|---|
Acceptance Date | Feb 29, 2016 |
Online Publication Date | Mar 16, 2016 |
Publication Date | Jul 1, 2016 |
Deposit Date | Feb 29, 2016 |
Publicly Available Date | Mar 16, 2017 |
Journal | International Review of Economics and Finance |
Print ISSN | 1059-0560 |
Electronic ISSN | 1873-8036 |
Publisher | Elsevier |
Peer Reviewed | Peer Reviewed |
Volume | 44 |
Pages | 103-117 |
DOI | https://doi.org/10.1016/j.iref.2016.03.005 |
Public URL | https://durham-repository.worktribe.com/output/1418602 |
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Copyright Statement
© 2016 This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
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