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Duration and bond returns : empirical tests

The purpose of this thesis is to empirically investigate the role of duration in explaining bond price volatility caused by interest rate movements. Specifically, Canadian and American market data are used to test whether Macaulay/Fisher and Weil duration is an adequate measure of basis risk for default-free government bonds during the 20-year sample period January 1961 to December 1980.
The most important result of the study is that in either a Canadian or an American context there is no significant evidence to suggest that, on average, higher duration bonds earn higher returns. Specifically, there appears to be a negative, although insignificant, relationship on average between bond returns and duration. A possible explanation for this result is that interest rates have trended upwards over most of the sample period. American results suggest that when changes in the level of interest rates have been filtered out there is a positive, although insignificant, relationship between bond returns and duration.
Other results of the study are that coupon rates are positively related to bond returns (perhaps due to a tax effect), and that bond pricing errors are often related to subsequent returns. / Business, Sauder School of / Graduate

Identiferoai:union.ndltd.org:UBC/oai:circle.library.ubc.ca:2429/24396
Date January 1985
CreatorsFreedman, Ruth Janine
PublisherUniversity of British Columbia
Source SetsUniversity of British Columbia
LanguageEnglish
Detected LanguageEnglish
TypeText, Thesis/Dissertation
RightsFor non-commercial purposes only, such as research, private study and education. Additional conditions apply, see Terms of Use https://open.library.ubc.ca/terms_of_use.

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