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A Multivariate Time-Series Investigation of Annual Returns on Highest Grade Corporate Bonds

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  • Tuttle, Donald L.
  • Wilbur, William L.

Abstract

An attempt was made in this paper to build time-series models with strong structural relationships with various maturity-bond, holding period yields. The relative strength of several groups of key macroeconomic variables with bond returns was specified and tested.The most useful regressor with regard to short maturity issues was the monetary policy ratio which had a strong association with the dependent variable in the intermediate and short maturities. The rate of change of wholesale prices was also important in the explanation of capital market yields. The rate of change in the English bank rate added still to the explanatory power of the model, particularly in the longer maturities; the combination of these three variables produced the most effective model. The regression coefficients were frequently many times their respective standard errors, and the correlation for every equation for the final model was statistically significant.

Suggested Citation

  • Tuttle, Donald L. & Wilbur, William L., 1971. "A Multivariate Time-Series Investigation of Annual Returns on Highest Grade Corporate Bonds," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 6(2), pages 707-721, March.
    • Handle: RePEc:cup:jfinqa:v:6:y:1971:i:02:p:707-721_02
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