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A Comparative Analysis of the Returns on Provincial and Federal Canadian Bonds

Author

Listed:
  • Galvani, Valentina

    () (University of Alberta, Department of Economics)

  • Behnamian, Aslan

    (University of Alberta, Department of Economics)

Abstract

Our empirical analysis unveils a striking uniformity between the returns of Canadian federal and provincial bonds. Furthermore, the return spreads between these debt instruments are shown to be white noise. Relying on tests for mean-variance spanning, we also show that market participants are unlikely to benefit from expanding portfolios of federal bonds with debt securities issued by the Canadian provinces.

Suggested Citation

  • Galvani, Valentina & Behnamian, Aslan, 2009. "A Comparative Analysis of the Returns on Provincial and Federal Canadian Bonds," Working Papers 2009-7, University of Alberta, Department of Economics.
  • Handle: RePEc:ris:albaec:2009_007
    as

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    File URL: https://sites.ualberta.ca/~econwps/2009/wp2009-07.pdf
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    References listed on IDEAS

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    Cited by:

    1. Dhritidyuti Bose & Rajeev Jain & Lakshmanan L, 2011. "Determinants of Primary Yield Spreads of States in India: An Econometric Analysis," Working Papers id:4370, eSocialSciences.
    2. Beck, Roland & Ferrucci, Gianluigi & Hantzsche, Arno & Rau-Göhring, Matthias, 2017. "Determinants of sub-sovereign bond yield spreads – The role of fiscal fundamentals and federal bailout expectations," Journal of International Money and Finance, Elsevier, vol. 79(C), pages 72-98.

    More about this item

    Keywords

    diversification benefits; bonds; spanning; Canada;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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