Figure 3.
Part a presents D C C correlations for S and P 500 returns versus T bill yield change, together with the T P U index. The left y-axis for D C C correlations ranges from negative 0.5 to 0.5, with intervals of 0.1. The right y-axis for the T P U index ranges from 0 to 5, with intervals of 0.5. D C C correlations fluctuate throughout the period, generally between negative 0.4 and 0.5. The T P U index remains mostly below 0.5 for much of the period, with several smaller increases, before rising sharply towards 5 near the end. Vertical dashed event lines mark March 21, 2018, May 10, 2019, and April 2, 2025. Part b presents D C C correlations for Nasdaq returns versus T bill yield change with the T P U index. Both y axes have the same ranges as part a. D C C correlations fluctuate between approximately negative 0.4 and 0.5. The T P U index remains mostly below 0.5 before increasing sharply towards 5 near the end. The same three event dates are marked by vertical dashed lines.Conditional correlations from the DCC model (black line, left axis), Trade Policy Uncertainty (TPU) index (red line, right axis), and key trade-related events (vertical blue-dashed lines)