I intend to regress the correlation coefficient (rolling window and/or DCC) between NIKKEI 225 adjusted close and 10yr Japanese government bonds on inflation , inflation expectations and other factor which may or may not be important in order to evaluate their relative impact on the correlation coefficient.
However, I can't seem to find a sophisticated enough explanation for the correlation's existence other than the changing dynamics of the demand for these asset classes (viewing them as substitutes).
A discounted dividends model suggest a strictly positive relationship, but the data suggests otherwise.
What are the fundamental reasons for the correlation between stock returns and government bond yields that would explain the correlation switching signs?