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Predicting stock‐bond correlationsManagerial Finance
Document TypeJournal article
PublisherEmerald Group Publishing Limited
- Accounting research,
- Portfolio investment,
- Predictive validity,
AbstractFew studies have been conducted to explain the variation in stock-bond correlations. However, to construct efficient portfolios in a mean-variance framework, investors must make accurate projections of future correlations. The past variability in stock-bond correlations notwithstanding, practitioners usually project future correlations by extrapolating past data. The purpose of this paper is to develop a regression model that will generate projections of future correlations that are more accurate than what would be determined from naively extrapolating the co-deviations of the past.
Publisher StatementCopyright © Emerald Group Publishing Limited. Access to external full text or publisher's version may require subscription.
Citation InformationCheng, J. & Ryan, R. (2002) Predicting stock‐bond correlations. Managerial Finance, 28(4), 12–18. doi: 10.1108/03074350210767799