RT Journal Article
SR Electronic
T1 Decoupling
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 59
OP 66
DO 10.3905/jpm.2002.319843
VO 28
IS 3
A1 Les Gulko
YR 2002
UL https://pm-research.com/content/28/3/59.abstract
AB The returns of U.S. stocks and Treasury bonds are usually positively correlated, or coupled. As the stock market plunges, Treasury bonds tend to rally, and the daily returns become negatively correlated, or decoupled. In this article, the author examines the decoupling that accompanies stock market crashes. He begins by presenting empirical evidence of the stock–bond decoupling and next examines some implications. The main practical implication is that U.S. Treasury bonds offer effective diversification during financial crises, at the time it is needed most. The main theoretical implication is that normal probability distributions (both conditional and unconditional) generally misspecify the joint returns of U.S. stocks and Treasury bonds.