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Journal article
Inflation, Equity Market Volatility, and Bond Prices: Evidence from G7 Countries
Risks (Basel), v 11(11), pp 1-22
01 Nov 2023
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
This study examines the impacts of the US inflation rate on the bond prices of G7 countries across different maturities using inflation-induced equity market volatility (EMV) to better account for bond price determinants. The regression model, a GED-GARCH (1,1) procedure, is adopted to deal with the volatility clustering and fat tail features in bond return estimation. The testing results indicate that the inflation rate has a negative effect on bond returns across different maturities, although an exception occurs for longer maturities in Japan. Evidence shows that US inflation has a significant impact on bond returns for the non-US G7 countries. The negative effects from US inflation are more profound than those from the domestic market (except in Japan). This study introduces the equity market volatility arising from inflation or the Fed's interest rate change; this variable produces market volatility that has a positive effect on bond returns, offsetting part of the original negative effect from a rise in inflation.
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Details
- Title
- Inflation, Equity Market Volatility, and Bond Prices: Evidence from G7 Countries
- Creators
- Yu-Fen ChenThomas ChiangFu-Lai Lin
- Publication Details
- Risks (Basel), v 11(11), pp 1-22
- Publisher
- Mdpi
- Number of pages
- 22
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Bennett S. LeBow College of Business
- Web of Science ID
- WOS:001115352000001
- Scopus ID
- 2-s2.0-85178318315
- Other Identifier
- 991021812105204721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Business, Finance