Asymmetry in government bond returns

Ippei Fujiwara, Lena Mareen Körber, Daisuke Nagakura

Research output: Contribution to journalArticle

3 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)3218-3226
Number of pages9
JournalJournal of Banking and Finance
Volume37
Issue number8
DOIs
Publication statusPublished - 2013 Aug

Keywords

  • Conditional symmetry test
  • Government bond returns
  • Skewness

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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