Do Utility Stocks Provide Exposure To Bond Markets?

Abstract

This study examines the relationship between utility stock returns and various bond or interest rate index returns.  In contrast to the S&P 500 index, utility stocks show a positive relationship to bond returns.  Utility stocks also are more correlated with corporate bond returns than the stock indexes.  Overall, utility stocks are considered an excellent diversification tool.  The upside of the stock market can be captured, but with less downside risk.