Modeling fixed income excess returns

No 409, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: Excess returns earned in fixed-income markets have been modeled using the ARCH-M model of Engle et al. and its variants. We investigate whether the empirical evidence obtained from an ARCH-M type model is sensitive to the definition of the holding period (ranging from 5 days to 90 days) or to the choice of data used to compute excess returns (coupon or zero-coupon bonds). There is robust support for the inclusion of a term spread in a model of excess returns, while the significance of the in-mean term depends on characteristics of the underlying data.

Keywords: GARCH models; excess returns; term premium (search for similar items in EconPapers)
JEL-codes: C22 C52 E43 (search for similar items in EconPapers)
Pages: 33 pages
Date: 1998-06-26, Revised 2000-04-14
New Economics Papers: this item is included in nep-ifn
Note: This paper was previously titled "Conditional heteroskedasticity models of excess returns: How robust are the results?"
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Persistent link: https://EconPapers.repec.org/RePEc:boc:bocoec:409

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