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Yield Curve Investing: Optimizing Riskadjusted Returns

Author

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  • Charles Corcoran

Abstract

This paper investigates how recent changes in market interest rates have affected risk-adjusted returns. Returns are adjusted for duration, a measure of interest rate risk. Prior to the 2007 - 2008 rate decrease, one-year Treasuries offered the best risk/return tradeoff. As a result of the rate decrease, short rates dropped much more than longer rates, rendering the one-year Treasury less competitive. After 2008, the five and seven year Treasury maturities offer the best risk-adjusted returns.

Suggested Citation

  • Charles Corcoran, 2013. "Yield Curve Investing: Optimizing Riskadjusted Returns," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 7(2), pages 95-102.
    • Handle: RePEc:ibf:gjbres:v:7:y:2013:i:2:p:95-102
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    More about this item

    Keywords

    Yield Curve; Duration; Interest Rate Risk; Maturity; Mean Reversion; Risk-Adjusted Return;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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