{"status":"ok","message-type":"work","message-version":"1.0.0","message":{"indexed":{"date-parts":[[2026,10,24]],"date-time":"2026-10-24T17:38:45Z","timestamp":1792863525557,"version":"4.5.0"},"posted":{"date-parts":[[2026]]},"group-title":"SSRN","reference-count":33,"publisher":"Elsevier BV","license":[{"start":{"date-parts":[[2026,1,1]],"date-time":"2026-01-01T00:00:00Z","timestamp":1767225600000},"content-version":"unspecified","delay-in-days":0,"URL":"https:\/\/www.uspto.gov\/ip-policy\/copyright-policy\/copyright-basics"}],"content-domain":{"domain":[],"crossmark-restriction":false},"short-container-title":[],"abstract":"<jats:p>Government bonds are held for the payoff they are expected to deliver when equity falls, an expectation organised largely around a binary development classification. We ask whether a continuous measure of sovereign credit standing orders that payoff, and whether that ordering is distinct from that dichotomy. Across forty-one government bond markets and 8,761 qualifying country-months from January 2005 to December 2024, we measure hedge quality as the mean daily return on the ten-year benchmark bond over the days in a month when domestic equity falls, and credit standing as the monthly composite of the three major agencies\u2019 long-term foreign-currency ratings. Since the quantity of interest is the difference between sovereigns rather than movement over time, we estimate across country means by weighted least squares. The credit gradient is positive, well determined, and accounts for a substantial share of the cross-sectional variation in hedge quality. It persists when the classification is entered alongside the rating and is present inside each group, so the ordering does not appear to be the dichotomy restated. Sixteen markets record a negative mean bond return on down-equity days, seven of them classified advanced, which the classification does not identify. The ordering nonetheless compresses at the top of the rating scale. In every emerging market with exchange rate coverage the mean currency return on down-equity days is negative, so the local-currency measure overstates the dollar payoff at the lower end of the scale.<\/jats:p>","DOI":"10.2139\/ssrn.7665995","type":"posted-content","created":{"date-parts":[[2026,10,24]],"date-time":"2026-10-24T17:24:52Z","timestamp":1792862692000},"source":"Crossref","is-referenced-by-count":0,"title":["Beyond the advanced-emerging divide: Sovereign credit ratings and the downside equity hedge of government bonds"],"prefix":"10.2139","author":[{"given":"Warunya","family":"Chaitarin","sequence":"first","affiliation":[],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Chatchai","family":"Khiewngamdee","sequence":"additional","affiliation":[],"role":[{"vocabulary":"crossref","role":"author"}]}],"member":"78","reference":[{"issue":"4","key":"ref1","doi-asserted-by":"crossref","first-page":"1931","DOI":"10.1111\/jofi.12776","article-title":"Nonlinearity and Flight-to-Safety in the Risk-Return Trade-Off for Stocks and Bonds","volume":"74","author":"T Adrian","year":"2019","journal-title":"The Journal of Finance"},{"issue":"3","key":"ref2","doi-asserted-by":"crossref","first-page":"606","DOI":"10.1016\/j.jimonfin.2012.01.016","article-title":"Sovereign credit ratings and financial markets linkages: Application to European data","volume":"31","author":"A Afonso","year":"2012","journal-title":"Journal of International Money and Finance"},{"issue":"5","key":"ref3","doi-asserted-by":"crossref","first-page":"1532","DOI":"10.1093\/jjfinec\/nbae006","article-title":"COAALA: A Novel Approach to Understanding Extreme Stock-Bond Comovement","volume":"22","author":"A.-F Allard","year":"2024","journal-title":"Journal of Financial Econometrics"},{"issue":"1","key":"ref4","doi-asserted-by":"crossref","first-page":"249","DOI":"10.1111\/jofi.12434","article-title":"The Real Effects of Credit Ratings: The Sovereign Ceiling Channel","volume":"72","author":"H Almeida","year":"2017","journal-title":"The Journal of Finance"},{"issue":"2","key":"ref5","doi-asserted-by":"crossref","first-page":"139","DOI":"10.1080\/09603100601057854","article-title":"Why does the correlation between stock and bond returns vary over time?","volume":"18","author":"M Andersson","year":"2008","journal-title":"Applied Financial Economics"},{"issue":"2","key":"ref6","doi-asserted-by":"crossref","first-page":"541","DOI":"10.1017\/S0022109016000259","article-title":"Real Economic Shocks and Sovereign Credit Risk","volume":"51","author":"P Augustin","year":"2016","journal-title":"Journal of Financial and Quantitative Analysis"},{"issue":"6","key":"ref7","doi-asserted-by":"crossref","first-page":"2374","DOI":"10.1093\/rfs\/hhq014","article-title":"The Determinants of Stock and Bond Return Comovements","volume":"23","author":"L Baele","year":"2010","journal-title":"Review of Financial Studies"},{"issue":"2","key":"ref8","doi-asserted-by":"crossref","first-page":"689","DOI":"10.1093\/rfs\/hhz055","article-title":"Flights to Safety","volume":"33","author":"L Baele","year":"2020","journal-title":"The Review of Financial Studies"},{"issue":"4","key":"ref9","doi-asserted-by":"crossref","first-page":"339","DOI":"10.1016\/j.jfs.2008.08.001","article-title":"Flights and contagion-An empirical analysis of stockbond correlations","volume":"5","author":"D G Baur","year":"2009","journal-title":"Journal of Financial Stability"},{"issue":"2","key":"ref10","doi-asserted-by":"crossref","first-page":"217","DOI":"10.1111\/j.1540-6288.2010.00244.x","article-title":"Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold","volume":"45","author":"D G Baur","year":"2010","journal-title":"Financial Review"},{"issue":"3","key":"ref11","doi-asserted-by":"crossref","first-page":"925","DOI":"10.1093\/rfs\/hhm088","article-title":"Flight-to-Quality or Flight-to-Liquidity? Evidence from the Euro-Area Bond Market","volume":"22","author":"A Beber","year":"2009","journal-title":"Review of Financial Studies"},{"key":"ref12","first-page":"76","volume":"14","author":"M Bianconi","year":"2013","journal-title":"BRIC and the U.S. financial crisis: An empirical investigation of stock and bond markets"},{"issue":"1","key":"ref13","doi-asserted-by":"crossref","first-page":"233","DOI":"10.1016\/S0378-4266(02)00406-5","article-title":"The national market impact of sovereign rating changes","volume":"28","author":"R Brooks","year":"2004","journal-title":"Journal of Banking & Finance"},{"issue":"3","key":"ref14","doi-asserted-by":"crossref","first-page":"587","DOI":"10.1111\/isqu.12173","article-title":"Categories, Creditworthiness, and Contagion: How Investors' Shortcuts Affect Sovereign Debt Markets","volume":"59","author":"S M Brooks","year":"2015","journal-title":"International Studies Quarterly"},{"issue":"4","key":"ref15","doi-asserted-by":"crossref","first-page":"537","DOI":"10.1093\/jjfinec\/nbl005","article-title":"Asymmetric Dynamics in the Correlations of Global Equity and Bond Returns","volume":"4","author":"L Cappiello","year":"2006","journal-title":"Journal of Financial Econometrics"},{"issue":"4","key":"ref16","doi-asserted-by":"crossref","first-page":"1070","DOI":"10.1016\/j.intfin.2012.01.003","article-title":"Do sovereign credit ratings influence regional stock and bond market interdependencies in emerging countries","volume":"22","author":"R Christopher","year":"2012","journal-title":"Journal of International Financial Markets, Institutions and Money"},{"key":"ref17","doi-asserted-by":"crossref","first-page":"202","DOI":"10.1016\/j.irfa.2012.12.001","article-title":"Hedges and safe havens: An examination of stocks, bonds, gold, oil and exchange rates","volume":"29","author":"C Ciner","year":"2013","journal-title":"International Review of Financial Analysis"},{"issue":"1","key":"ref18","doi-asserted-by":"crossref","first-page":"161","DOI":"10.1017\/S0022109000001782","article-title":"Stock Market Uncertainty and the Stock-Bond Return Relation","volume":"40","author":"R Connolly","year":"2005","journal-title":"Journal of Financial and Quantitative Analysis"},{"key":"ref19","doi-asserted-by":"crossref","first-page":"41","DOI":"10.1016\/j.ribaf.2015.09.001","article-title":"Impact of financial market uncertainty and macroeconomic factors on stock-bond correlation in emerging markets","volume":"36","author":"N Dimic","year":"2016","journal-title":"Research in International Business and Finance"},{"issue":"6","key":"ref20","doi-asserted-by":"crossref","first-page":"3097","DOI":"10.1111\/jofi.12965","article-title":"Sovereign Debt Portfolios, Bond Risks, and the Credibility of Monetary Policy","volume":"75","author":"W Du","year":"2020","journal-title":"The Journal of Finance"},{"key":"ref21","doi-asserted-by":"crossref","first-page":"25","DOI":"10.1016\/j.intfin.2016.11.014","article-title":"The equity-like behaviour of sovereign bonds","volume":"48","author":"A Dufour","year":"2017","journal-title":"Journal of International Financial Markets, Institutions and Money"},{"issue":"10","key":"ref22","first-page":"3162","article-title":"Does sovereign debt ratings news spill over to international stock markets","author":"M A Ferreira","year":"2007","journal-title":"Journal of Banking &amp"},{"key":"ref23","doi-asserted-by":"crossref","first-page":"371","DOI":"10.1016\/j.iref.2018.02.004","article-title":"Emerging market local currency sovereign bond yields: The role of exchange rate risk","volume":"57","author":"B Gadanecz","year":"2018","journal-title":"International Review of Economics & Finance"},{"issue":"8","key":"ref24","first-page":"1954","article-title":"Dependence structure and extreme comovements in international equity and bond markets","author":"R Garcia","year":"2011","journal-title":"Journal of Banking &amp"},{"issue":"6","key":"ref25","first-page":"1327","article-title":"Variations in sovereign credit quality assessments across rating agencies","volume":"34","author":"P Hill","year":"2010","journal-title":"Journal of Banking &amp"},{"issue":"2","key":"ref26","doi-asserted-by":"crossref","first-page":"171","DOI":"10.1093\/wber\/16.2.171","article-title":"Emerging Market Instability: Do Sovereign Ratings Affect Country Risk and Stock Returns?","volume":"16","author":"G Kaminsky","year":"2002","journal-title":"The World Bank Economic Review"},{"issue":"2","key":"ref27","doi-asserted-by":"crossref","first-page":"197","DOI":"10.1016\/j.jfineco.2014.07.001","article-title":"Conditional risk premia in currency markets and other asset classes","volume":"114","author":"M Lettau","year":"2014","journal-title":"Journal of Financial Economics"},{"key":"ref28","doi-asserted-by":"crossref","first-page":"126","DOI":"10.1016\/j.ememar.2014.09.006","article-title":"Emerging market local currency bonds: Diversification and stability","volume":"22","author":"K Miyajima","year":"2015","journal-title":"Emerging Markets Review"},{"issue":"3","key":"ref29","doi-asserted-by":"crossref","first-page":"17","DOI":"10.1080\/0015198X.2024.2317333","article-title":"Empirical Evidence on the Stock-Bond Correlation","volume":"80","author":"R Molenaar","year":"2024","journal-title":"Financial Analysts Journal"},{"issue":"7","key":"ref30","first-page":"2041","article-title":"Sovereign credit ratings: Guilty beyond reasonable doubt","author":"N Mora","year":"2006","journal-title":"Journal of Banking &amp"},{"issue":"6","key":"ref31","doi-asserted-by":"crossref","first-page":"536","DOI":"10.1080\/00036846.2015.1083088","article-title":"Trends in stock-bond correlations","volume":"48","author":"H Ohmi","year":"2016","journal-title":"Applied Economics"},{"issue":"6","key":"ref32","doi-asserted-by":"crossref","first-page":"1014","DOI":"10.1016\/j.jbankfin.2008.10.016","article-title":"Time-varying market integration and stock and bond return concordance in emerging markets","volume":"33","author":"V Panchenko","year":"2009","journal-title":"Journal of Banking & Finance"},{"issue":"4","key":"ref33","doi-asserted-by":"crossref","first-page":"670","DOI":"10.1016\/j.jbankfin.2008.11.010","article-title":"The stock-bond correlation and macroeconomic conditions: One and a half centuries of evidence","volume":"33","author":"J Yang","year":"2009","journal-title":"Journal of Banking & Finance"}],"container-title":[],"original-title":[],"deposited":{"date-parts":[[2026,10,24]],"date-time":"2026-10-24T17:25:35Z","timestamp":1792862735000},"score":1,"resource":{"primary":{"URL":"https:\/\/www.ssrn.com\/abstract=7665995"}},"subtitle":[],"short-title":[],"issued":{"date-parts":[[2026]]},"references-count":33,"URL":"https:\/\/doi.org\/10.2139\/ssrn.7665995","relation":{},"subject":[],"published":{"date-parts":[[2026]]},"subtype":"preprint"}}