Yaxun Wang
ABSTRACT
The purpose of the analysis in this paper is to determine the strength of the linear relationship between monthly CUSIP number*, US corporate issuance data and several key macroeconomic and financial factors, and its historical correlation to the overall stock and bond market performance. Empirical evidence from analyzing these correlations can provide useful insights for guiding asset allocation, portfolio construction and risk management. The correlations between CUSIP issuance series, key macroeconomic factors, and overall financial assets performance are constantly subject to changing market conditions. Since the importance of assessing the correlation's sensitivity to key macroeconomic factors may enhance in the current environment of expansionary central bank monetary policy, it is necessary to emphasize the potential effect of regime shifts when making asset allocation decisions. If this effect were to take place, traditional investment paradigms that investors have accustomed to may be less relevant, and forecast models that primarily rely on point estimates of correlation can be misleading if the current macroeconomic regime shifts are not taken into consideration.
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Index Terms
- The Analysis on the Relation Between CUSIP Data and Macroeconomic Financial Factors and Its Correlation to the Capital Markets
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