Asymmetry in government bond returns
AbstractIs there asymmetry in the distribution of government bond returns in developed countries? Can asymmetries be predicted using financial and macroeconomic variables? To answer the first question, we provide evidence for asymmetry in government bond returns in particular for short maturities. This finding has important implications for modeling and forecasting government bond returns. For example, widely used models for yield curve analysis such as the affine term structure model assume symmetrically distributed innovations. To answer the second question, we find that liquidity in government bond markets predicts the coefficient of skewness with a positive sign, meaning that the probability of a large and negative excess return is more likely in a less liquid market. In addition, a positive realized return is associated with a negative coefficient of skewness, or a small probability of a large and negative return in the future.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Banking & Finance.
Volume (Year): 37 (2013)
Issue (Month): 8 ()
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Web page: http://www.elsevier.com/locate/jbf
Government bond returns; Skewness; Conditional symmetry test;
Other versions of this item:
- Ippei Fuijwara & Lena Mareen Korber & Daisuke Nagakura, 2013. "Asymmetry in Government Bond Returns," Macroeconomics Working Papers 23399, East Asian Bureau of Economic Research.
- Ippei Fuijwara & Lena Mareen Korber & Daisuke Nagakura, 2013. "Asymmetry in Government Bond Returns," Finance Working Papers 23399, East Asian Bureau of Economic Research.
- Ippei Fujiwara & Lena Mareen Korber & Daisuke Nagakura, 2013. "Asymmetry in Government Bond Returns," CAMA Working Papers 2013-12, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
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