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Linearity and stationarity of G7 government bond returns

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Author Info

  • Venus Khim-Sen Liew

    ()
    (Universiti Malaysia Sarawak)

  • Zhuo Qiao

    ()
    (University of Macau)

  • Wing-keung Wong

    ()
    (Hong Kong Baptist University)

Abstract

This study investigates the linearity and stationarity properties of government bond returns for the G7 economies. Our results from Luukkonen et al. (1988) linearity test reveal the nonlinear nature of all of the G7 bond returns. Furthermore, we had determined that they are stationary by the Kapetanios et al. (2003) nonlinear unit root test. In sum, it can be concluded that G7 government bond returns are stationary but possess a nonlinear feature. Our findings provide useful information for researchers interested in bond markets.

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File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I4-P243.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 30 (2010)
Issue (Month): 4 ()
Pages: 2642-2655

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Handle: RePEc:ebl:ecbull:eb-10-00110

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Keywords: government bond returns; G7; nonlinear; linearity; stationarity;

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  1. Ahmad Baharumshah & Venus Liew, 2006. "Forecasting Performance of Exponential Smooth Transition Autoregressive Exchange Rate Models," Open Economies Review, Springer, vol. 17(2), pages 235-251, April.
  2. Bodart, V. & Reding, P., 1998. "Exchange Rate Regime, Volatility and International Correlations on Bond and Stock Markets," Papers 204, Notre-Dame de la Paix, Sciences Economiques et Sociales.
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  9. Venus Khim-sen Liew & Ahmad Zubaidi Baharumshah & Terence Tai-leung Chong, 2003. "Are Asian Real Exchange Rates Stationary?," International Finance 0307002, EconWPA, revised 01 Nov 2004.
  10. George Kapetanios & Y. Shin & A. Snell, 2000. "Testing for a Unit Root against Nonlinear STAR Models," NIESR Discussion Papers 164, National Institute of Economic and Social Research.
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  25. Ahmad Zubaidi Baharumshah & Venus Khim-Sen Liew & Nor Aishah Hamzah, 2008. "Real interest rate parity in the ASEAN-5 countries: a nonlinear perspective," Applied Economics Letters, Taylor & Francis Journals, vol. 15(12), pages 955-958.
  26. Kian-Ping Lim & Venus Khim-Sen Liew, 2007. "Nonlinear mean reversion in stock prices: evidence from Asian markets," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 3(1), pages 25-29, January.
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