On the relationship between changes in stock prices and bond yields in the G7 countries: Wavelet analysis

The purpose of this paper is to shed a new perspective on the relationship between changes in stock prices and bond yields in the G7 countries. Theoretical studies argue that this relationship may be negative or positive. To investigate the relationship, we model a newly developed time-series technique: wavelet correlation analysis. The key empirical results show that the correlation between changes in stock prices and bond yields can differ from country to country and can also depend on the time scale. Furthermore, wavelet analysis reveals that changes in stock prices and bond yields do not move together in most G7 countries, except in Japan.