Submission Date

4-26-2024

Document Type

Paper

Department

Business & Economics

Adviser

Jennifer VanGilder

Committee Member

Sheryl Goodman

Committee Member

Victor Ricciardi

Department Chair

Jennifer VanGilder

Project Description

This research delves into the intricate dynamics of the stock-bond correlation, seeking to reveal the underlying factors that drive its fluctuations. Through a comprehensive analysis of empirical data, it investigates the diverse array of influences that contribute to the variability in the relationship between stock and bond returns. Factors such as inflation, unemployment, market volatility, FED policy, and market growth are scrutinized for their impact on altering the correlation pattern. Additionally, the research explores the implications of the stock-bond correlation on portfolio diversification. By explaining the multifaceted nature of the correlation, this study provides valuable insights for investors, policymakers, and financial analysts, aiding them in navigating the complexities of financial markets and shedding light on what causes movements in the correlation of stock and bond returns. Through empirical analysis, it was discovered that inflation, unemployment, and changes in the effective federal funds rate were the most significant driving factors of changes in the stock-bond correlation.

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