Scandinavian Working Papers in Economics
Working Papers,
Copenhagen Business School, Department of Economics
No 04-2000: ON THE RELATIONSHIP BETWEEN THE DANISH STOCK AND BOND MARKET IN THE MEDIUM AND LONG TERM
Jan Overgaard Olesen and Ole Risager
Additional contact information
Jan Overgaard Olesen: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Ole Risager: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Abstract: This short paper studies the empirical relationship between realized stock returns and bond
yields at the 5- and 10-year investment horizons, respectively. Using annual Danish data since
1927, we find that stock returns and bond yields are closely linked in the medium and long
term, as we estimate strong cointegrating relations at both horizons. Hence, at the 5- and 10-
year investment horizons a high bond yield tends to go hand in hand with a high stock return,
and vice versa. Results show that stock returns tend to respond less than one-to-one to
changes in the bond yield.
Keywords: stock returns; Bond yields; Denmark
22 pages, February 1, 2000
Full text files
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