Equity Volatility Bond Yields and Yield Spreads

EQUITY VOLATILITY, BOND YIELDS, AND YIELD SPREADS DANIEL JUBINSKI* AMY F. LIPTON This study examines the impact of implied and coetaneous equity securities industry capriciousness on Treasury yields, be get yields, and yield spreads over Treasuries. The CBOE VIX is the measure of implied irritability, and the measure of synchronal volatility is constructed using intraday squared S&P vitamin D returns. We ?nd that confiscate yields and spreads respond to changes in equity commercialise volatility in a manner consistent with a flight-to-quality effect. Both shortand long-term Treasury yields fall in chemical reaction to increases in implied volatility, and the yield curve ?attens modestly. Yields on short-term enthronization grade bonds fall in response to contemporaneous volatility shocks, while long-term spreads on low-quality issues widen. This indicates that investors look ahead in anticipation of changes in equity grocery store volatility notwithstanding resp ond more strongly to changes in contemporaneous market activity. © 2011 Wiley Periodicals, Inc. Jrl Fut Mark 32:480 503, 2012 INTRODUCTION This study examines the question of whether bond yields and spreads over the corresponding Treasury security are consistently affected by equity market The authors thank an anonymous judge for many helpful comments and suggestions. Research support was provided by St.

Josephs University. Any remaining errors are, of course, the authors own. *Correspondence author, Department of Finance, St. Josephs University, Mandeville abidance 340, 5600 City Avenue, Philadelphia, PA 19 131. Tel: (610) 660-3449, Fax: (610) 660-198! 6, e-mail: dan.jubinski@ sju.edu sure July 2010; current February 2011 ? Daniel Jubinski and Amy F. Lipton are in the Department of Finance, St. Josephs University, Philadelphia, Pennsylvania. The journal of Futures Markets, Vol. 32, no(prenominal) 5, 480503 (2012) © 2011 Wiley Periodicals, Inc. View this article online May 26, 2011 at Wiley Online Library (wileyonlinelibrary.com) inner(a):...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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