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Asymmetry in government bond returns

Fujiwara, Ippei, Körber, Lena Mareen and Nagakura, Daisuke (2013) Asymmetry in government bond returns. Journal of Banking and Finance, 37 (8). pp. 3218-3226. ISSN 0378-4266

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Identification Number: 10.1016/j.jbankfin.2013.03.002

Abstract

Is 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.

Item Type: Article
Official URL: http://www.journals.elsevier.com/journal-of-bankin...
Additional Information: © 2013 Elsevier B. V.
Divisions: Economics
Centre for Economic Performance
Subjects: H Social Sciences > HG Finance
JEL classification: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Determination of Interest Rates; Term Structure of Interest Rates
G - Financial Economics > G1 - General Financial Markets > G10 - General
G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates
Sets: Departments > Economics
Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 21 Jun 2013 10:24
Last Modified: 20 Feb 2019 10:34
URI: http://eprints.lse.ac.uk/id/eprint/50909

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