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A variance decomposition of index-linked bond returns

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  • Breedon, Francis

Abstract

We undertake a variance decomposition of index-linked bond returns for the US, the UK and Iceland. In all cases, news about future excess returns is the key driver though only for Icelandic bonds are returns independent of inflation.

Suggested Citation

  • Breedon, Francis, 2012. "A variance decomposition of index-linked bond returns," Economics Letters, Elsevier, vol. 116(1), pages 49-51.
  • Handle: RePEc:eee:ecolet:v:116:y:2012:i:1:p:49-51
    DOI: 10.1016/j.econlet.2012.01.007
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    References listed on IDEAS

    as
    1. Campbell, John Y & Ammer, John, 1993. " What Moves the Stock and Bond Markets? A Variance Decomposition for Long-Term Asset Returns," Journal of Finance, American Finance Association, vol. 48(1), pages 3-37, March.
    2. Carolin E. Pflueger & Luis M. Viceira, 2011. "Return Predictability in the Treasury Market: Real Rates, Inflation, and Liquidity," Harvard Business School Working Papers 11-094, Harvard Business School, revised Sep 2013.
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    Cited by:

    1. Noureddine Benlagha, 2013. "The Long-run Relationship among Index-linked Bonds and Conventional Bonds," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 15-24, February.

    More about this item

    Keywords

    Index-linked bonds; Variance decomposition; Real interest rate;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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