TY  - UNPD
A1  - Koulovatianos, Christos
A1  - Li, Jian
A1  - Weber, Fabienne
T1  - Market fragility and the paradox of the recent stock-bond dissonance
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 589
N2  - After the Lehman-Brothers collapse, the stock index has exceeded its pre-Lehman-Brothers peak by 36% in real terms. Seemingly, markets have been demanding more stocks instead of bonds. Yet, instead of observing higher bond rates, paradoxically, bond rates have been persistently negative after the Lehman-Brothers collapse. To explain this paradox, we suggest that, in the post-Lehman-Brothers period, investors changed their perceptions on disasters, thinking that disasters occur once every 30 years on average, instead of disasters occurring once every 60 years. In our asset-pricing calibration exercise, this rise in perceived market fragility alone can explain the drop in both bond rates and price-dividend ratios observed after the Lehman-Brothers collapse, which indicates that markets mostly demanded bonds instead of stocks.
T3  - CFS working paper series - 589 
KW  - asset pricing
KW  - disaster risk
KW  - price-dividend ratio
KW  - bond returns
Y1  - 2017
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/43739
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-437394
UR  - https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3084155
IS  - November 7, 2017
PB  - Center for Financial Studies
CY  - Frankfurt, M.
ER  -