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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 Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
Research Centres and Institutes: Applied Macroeconomics, Birkbeck Centre for
Depositing User: Pedro Gomes
Date Deposited: 12 Oct 2017 09:28
Last Modified: 19 Feb 2025 01:05
URI: https://eprints.bbk.ac.uk/id/eprint/20028

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