Charlotte Christiansen

Volatility-Spillover Effects in European Bond Markets

Volatility spillover from the US and aggregate European bond markets into individual European bond markets using a GARCH volatility-spillover model is analysed. Strong statistical evidence of volatility spillover from the US and aggregate European bond markets is found. For EMU countries, the US volatility-spillover effects are rather weak (in economic terms) whereas the European volatility-spillover effects are strong. The bond markets of EMU countries have become much more integrated after the introduction of the euro, and in recent years they have become close to being perfectly integrated. The main driver of the integration appears to be convergence in interest rates.

Are Economists More Likely to Hold Stocks

Using a large panel data set containing detailed information on educational attainments as well as financial and socioeconomic variables for individual investors, we show that economists are more likely to hold stocks than otherwise identical investors. First, we consider the change in stockholdings associated with (i) completing an economics education and (ii) an economist moving into the household. Second, we model stock market participation using a probit model with unobserved individual heterogeneity. Third, instrumental variables estimation allows us to identify the causal effect of an economics education on stock market participation. Throughout, we focus explicitly on the effect of a change in educational status on the likelihood of holding stocks.

Realized Bond-Stock Correlation: Macroeconomic Announcement Effects

We investigate the effects of macroeconomic announcements on the realized correlation between bond and stock returns. Our results deliver insights into the dominating drivers of bond-stock comovements. We find that it is not so much the surprise component of the announcement, but the mere fact that an announcement occurs that influences the realized bond-stock correlation. The impact of macroeconomic announcements varies across the business cycle. Announcement effects are highly dependent on the sign of the realized bond-stock correlation which has recently gone from positive to negative. Macroeconomic announcement effects on realized bond and stock volatilities are also investigated.

The Risk-Return Trade-Off in Human Capital Investment

In this paper we analyze investments in human capital assets in a way which is standard for financial assets, but not (yet) for human capital assets. We study mean-variance plots of human capital assets. We compare the properties of human capital returns using a performance measure and by using tests for mean-variance spanning. A risk-return trade-off is revealed, which is not only related to the length of education but also to the type of education. We identify a range of educations that are efficient in terms of investment goods, and a range of educations that are inefficient, and may be chosen for consumption purposes.

Macroeconomic announcement effects on the covariance structure of government bond returns

Abstract This paper concerns the effects of macroeconomic announcements on the covariance structure of US government bond returns for six different maturities; the study shows that the conditional variances, covariances, and correlation coefficients are significantly greater on announcement days. On non-announcement days, the correlation coefficients are relatively large and are greater the closer the bonds are with respect to the time to maturity. The maturity dependency is substantially dampened on announcement days and, hence, releases of macroeconomic news induce common movement in the government bond market that strengthen the correlations.

Insulin treatment of the insulin-dependent diabetic patient undergoing minor surgery. Continuous intravenous infusion compared with subcutaneous administration.

In a prospective randomised study in 20 insulin‐dependent diabetics who had minor surgery under general anaesthesia we compared the metabolic responses to intravenous glucose‐insulin‐potassium infusion with those who had conventional subcutaneous insulin administration. The former treatment resulted in lower blood glucose levels both during the infusion period (p < 0.05) as well as the entire observation period (operative, first and second postoperative days; p < 0.01). More blood glucose values were within the intended range of 5 to 10 mmol/litre in the glucose‐insulin‐potassium as compared to the conventional group (48% versus 24%; p < 0.01). The levels of lactate, 3‐hydroxybutyrate, glycerol, alanine, glucagon, insulin and growth hormone did not differ between the two groups. The infusion regimen resulted in better glycaemic control both peri‐and postoperatively than the conventional subcutaneous insulin regimen in insulin‐dependent diabetic patients who have minor surgery.

Level-ARCH Short Rate Models with Regime Switching: Bivariate Modeling of US and European Short Rates

This paper introduces regime switching into level-ARCH models for the short rates of the US, the UK, and Germany. Once regime switching and level effects are included there are no gains from including ARCH effects. It is of secondary importance how the regime switching is specified. The estimated level parameters differ across countries. The corresponding new bivariate models show that the states of the US and UK short rate volatilities are not independent nor identical. There is Granger causality from the US to the UK short rate volatility state but not vice versa. There is no contagion between the US and UK volatility states. Equivalent results apply to the relation between the US and German volatility states.

Forecasting US Recessions: The Role of Sentiment

We study the role of sentiment variables as predictors for US recessions. We combine sentiment variables with either classical recession predictors or common factors based on a large panel of macroeconomic and financial variables. Sentiment variables hold vast predictive power for US recessions in excess of both the classical recession predictors and the common factors. The strong importance of the sentiment variables is documented both in-sample and out-of-sample.

Revisiting the Shape of the Yield Curve: The Effect of Interest Rate Volatility

This paper examines the relationship between interest-rate volatility and the shape of the yield curve. The yield curve is parsimoniously described by its level, slope, and curvature. The level, the slope and the curvature are analyzed within a trivariate heteroskedastic model, where the conditional short-rate volatility is included in the mean specification. The slope and the curvature depend positively and significantly on the short-rate volatility. The effect of the interest rate volatility is more pronounced for the curvature than for the slope. Differences between subperiods are explored, as are differences across the maturity spectrum.

Smooth Transition Patterns in the Realized Stock- Bond Correlation

This paper explores the time variation in the stock–bond correlation using high-frequency data. Gradual transitions between regimes of negative and positive stock–bond correlation are well accommodated by the smooth transition regression (STR) model. We find that the regimes are systematically related to movements in financial and to a minor extent macroeconomic transition variables. In particular, the most informative transition variables are the short rate, the yield spread, and the VIX volatility index. Importantly, both in-sample and out-of-sample evaluation criteria show that multiple transition variable STR specifications considerably outperform single transition variable STR models. Our results are robust to different forecast horizons.