Journal
ECONOMICS LETTERS
Volume 167, Issue -, Pages 36-39Publisher
ELSEVIER SCIENCE SA
DOI: 10.1016/j.econlet.2018.03.006
Keywords
Conditional correlation; GARCH; Bond and stock returns comovement; US presidential cycles
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Utilizing a DCC-GARCH model to capture time-varying correlations, we show that Democratic administrations are generally associated with lower degree of co-movement between the stock and government bond returns. The findings are in line with the documented presidential cycle effect on stock market returns and corroborate recent evidence that, when risk aversion is high, agents tend to elect the Democratic Party. (C) 2018 Elsevier B.V. All rights reserved.
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