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    In search of the determinants of European asset market comovements

    Gomes, Pedro and Taamouti, A. (2016) In search of the determinants of European asset market comovements. International Review of Economics & Finance 44 , pp. 103-117. ISSN 1059-0560.

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    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 percent of the variation of the covariances between European stocks and 25 to 35 percent of the covariances between European bonds. The information improves the portfolio performance compared to an equally weighted portfolio

    Metadata

    Item Type: Article
    Keyword(s) / Subject(s): Stock and bond comovements, affine general equilibrium models, Eurozone crisis, Google Trends, portfolio weights modeling
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Research Centre: Applied Macroeconomics, Birkbeck Centre for
    Depositing User: Pedro Gomes
    Date Deposited: 12 Oct 2017 09:28
    Last Modified: 12 Oct 2017 09:28
    URI: http://eprints.bbk.ac.uk/id/eprint/20028

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