Excess Returns and Risk at the Long End of the Treasury Market: An EGARCH-M Approach
In this paper we model weekly excess returns of ten-year Treasury notes and long-term Treasury bonds from 1968 through 1993 using an exponential generalized autoregressive conditional heteroskedasticity in mean (EGARCH-M) approach. The results indicate the presence of conditional heteroskedasticity and a strong tendency for the ex-ante volatility of excess returns to increase more following negative excess return innovations compared with positive innovations of equal magnitude. In addition, increases in ex-ante volatility are associated in some subperiods with rising excess returns on longer-term instruments, although the slope of the yield curve and lagged excess returns generally remain significant predictors of excess returns.
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Volume (Year): 19 (1996)
Issue (Month): 3 (Fall)
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