Authors :
Sohail Raza; Shahzad Munir
Volume/Issue :
Volume 7 - 2022, Issue 5 - May
Google Scholar :
https://bit.ly/3IIfn9N
Scribd :
https://bit.ly/3xl8yHD
DOI :
https://doi.org/10.5281/zenodo.6626242
Abstract :
This paper attempts to find out the question
of whether the benchmark bond yields affect thestock
index in the US. To study the impact of the US bond
market on the US stock indices, this study employs the
Ordinary Least Square (OLS) technique, where the
stock index of S&P 500, NYSE composite, and Dow
Jones indices are used as the dependent variable, and US
10Yr Bond yield as the main independent variable. The
time series used in this analysis were found nonstationary and the first difference is taken to convert
them into stationary series. The Augmented Dickey
Fuller(ADF) test statistics show that the series becomes
stationary at first difference. Three separate regressions
on S&P 500, NYSE Composite, and Dow Jones at first
difference order are performed to analyze the effect of
bond yield on stock indices with a reasonable set of
control variables such as inflation, unemployment, crime
rates, real effective exchange rate, etc. The statistical
results show that the benchmark bond yield has a
positive significant impact on the stock index of S&P 500,
NYSE Composite, and Dow Jones. The economic
implication of the results is that the benchmark bond
yield predicts the stock index significantly and there is a
moderate amount of correlation between the estimates
and the time series as shown by the Variance Inflation
Factor (VIF) respectively
Keywords :
Bond yields; NYSE, Dow Jones; S&P 500; US
This paper attempts to find out the question
of whether the benchmark bond yields affect thestock
index in the US. To study the impact of the US bond
market on the US stock indices, this study employs the
Ordinary Least Square (OLS) technique, where the
stock index of S&P 500, NYSE composite, and Dow
Jones indices are used as the dependent variable, and US
10Yr Bond yield as the main independent variable. The
time series used in this analysis were found nonstationary and the first difference is taken to convert
them into stationary series. The Augmented Dickey
Fuller(ADF) test statistics show that the series becomes
stationary at first difference. Three separate regressions
on S&P 500, NYSE Composite, and Dow Jones at first
difference order are performed to analyze the effect of
bond yield on stock indices with a reasonable set of
control variables such as inflation, unemployment, crime
rates, real effective exchange rate, etc. The statistical
results show that the benchmark bond yield has a
positive significant impact on the stock index of S&P 500,
NYSE Composite, and Dow Jones. The economic
implication of the results is that the benchmark bond
yield predicts the stock index significantly and there is a
moderate amount of correlation between the estimates
and the time series as shown by the Variance Inflation
Factor (VIF) respectively
Keywords :
Bond yields; NYSE, Dow Jones; S&P 500; US
