Cross-Relations between Stock and Bond Markets

Framing stock and bond market characteristics as an endogenous and unified system, this paper investigates joint relationships between stock returns, stock trading volume, bond returns, and bond trading volume. Existing literature largely ignores reverse causality by considering an isolated bidirectional relationship between pairs of these effects. In contrast, we explore the endogenous, simultaneous linkages between these cross-market characteristics. We document simultaneous cross-market effects between stock and corporate bond markets, and present new evidence that endogeneity has an important role − specifically, in terms of informational efficiency and the significance and direction of cross-market relations between returns and trading volume