TY - JOUR

T1 - Asymmetry in government bond returns

AU - Fujiwara, Ippei

AU - Körber, Lena Mareen

AU - Nagakura, Daisuke

PY - 2013/8

Y1 - 2013/8

N2 - 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.

AB - 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.

KW - Conditional symmetry test

KW - Government bond returns

KW - Skewness

UR - http://www.scopus.com/inward/record.url?scp=84878632351&partnerID=8YFLogxK

U2 - 10.1016/j.jbankfin.2013.03.002

DO - 10.1016/j.jbankfin.2013.03.002

M3 - Article

SN - 0378-4266

VL - 37

SP - 3218

EP - 3226

JO - Journal of Banking and Finance

JF - Journal of Banking and Finance

IS - 8

ER -