Izvorni znanstveni članak
https://doi.org/10.32676/n.11.1.7
The breakdown of the classic portfolio hedge: a Markov-switching analysis of the US stock-bond correlation
Luka Šikić
; Hrvatsko katoličko sveučilište
Sažetak
This paper empirically investigates the structural integrity of the traditional stock-bond
relationship, the cornerstone of the 60/40 portfolio, during the high inflation period of 2022-
2023. The aim is to quantify the nature of the stock-bond correlation shift and determine if it
represents a distinct market regime compared to prior crises. The methodology utilizes a
univariate two-state Markov-Switching model applied to daily returns of the SPDR S&P 500
ETF (SPY) and the iShares 20+ Year Treasury Bond ETF (TLT) from 2007 to the end of 2023
to endogenously identify distinct market regimes. The results show that while the stock
market's "Crisis" regime was active during the Global Financial Crisis, COVID-19, and the 2022
downturn, the bond market's reaction differed fundamentally. In 2022, both stocks and bonds
were simultaneously in their high volatility, negative-return "Crisis" regimes, a stark contrast to
prior crises where bonds acted as a "Safe Haven." It is concluded that the diversifying power
of U.S. Treasury bonds is regime-dependent and fails during inflation-driven downturns,
representing a fundamental regime shift and a significant challenge to traditional asset
allocation models.
Ključne riječi
stock-bond correlation, Markov-Switching model, asset allocation, 60/40 portfolio, inflation
Hrčak ID:
341058
URI
Datum izdavanja:
12.12.2025.
Posjeta: 2.456 *