title: On the economic determinants of optimal stock-bond portfolios: international evidence
creator: Conrad, Christian
creator: Stuermer, Karin
subject: ddc-330
subject: 330 Economics
description: Using a modified DCC-MIDAS specification that allows the long-term correlation component to be a function of multiple explanatory variables, we show that the stock-bond correlation in the US, the UK, Germany, France, and Italy is mainly driven by inflation and interest rate expectations as well as a flight-to-safety during times of stress in financial markets. Based on the new DCC-MIDAS model, we construct stock-bond hedge portfolios and show that these portfolios outperform various benchmark  portfolios in terms of portfolio risk. While optimal daily weights minimize portfolio risk, we find that portfolio turnover and trading costs can be substantially reduced when switching to optimal monthly weights.
date: 2017-07-14
type: Working paper
type: info:eu-repo/semantics/workingPaper
type: NonPeerReviewed
format: application/pdf
identifier: https://archiv.ub.uni-heidelberg.de/volltextserverhttps://archiv.ub.uni-heidelberg.de/volltextserver/23231/1/__ad.uni-heidelberg.de_wiso_u.arnold_Desktop_dp636.pdf
identifier: DOI:10.11588/heidok.00023231
identifier: urn:nbn:de:bsz:16-heidok-232315
identifier:   Conrad, Christian ; Stuermer, Karin  (2017) On the economic determinants of optimal stock-bond portfolios: international evidence.  [Working paper]     
relation: https://archiv.ub.uni-heidelberg.de/volltextserver/23231/
rights: info:eu-repo/semantics/openAccess
rights: http://archiv.ub.uni-heidelberg.de/volltextserver/help/license_urhg.html
language: eng