Time-varying market integration and stock and bond return concordance in emerging markets

Elsevier Inc
Publication Type:
Journal Article
Journal of Banking and Finance, 2009, 33 (6), pp. 1014 - 1021
Issue Date:
Full metadata record
We investigate the extent to which emerging stock market integration affects the joint behavior of stock and bond returns using a two-stage semi-parametric approach. Using a sample of 18 emerging markets, we find an unambiguous and robust link between emerging stock market integration and stockbond return decoupling. We explain this with a decline in the segmentation risk premia in equities modeled by De Jong and De Roon [De Jong, F., De Roon, F.A., 2005. Time-varying market integration and expected returns in emerging markets. Journal of Financial Economics 78, 583613] that leads to increased demand for stocks and reduced or unchanged demand for bonds. Our findings deliver new insights into the financial liberalization and stockbond comovement literatures.
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