On the Economic fundamentals behind the Dynamic Equicorrelations among Asset classes: Global evidence from Equities, Real estate, and Commodities

We reveal the macroeconomic determinants of dynamic correlations between three global asset markets: equities, real estate, and commodities. Conditional equicorrelations, computed by GJR-GARCH-DECO model, are explained macro-financial proxies economic policy financial uncertainty, credit conditions, activity, business consumer confidence, geopolitical risk. Our results suggest that elevated cross-asset associated with higher tighter lower risk, while related to stronger business, confidence. further focus on uncertainty (EPU) as a potent catalyst markets integration process conclude EPU magnifies all macro-effects across correlations. Lastly, we investigate crisis effect time-varying impact correlations’ macro-drivers. The structural break amplifies influence exert evolution apart from risk upshot, which is alleviated after advent.