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Seasonality in Canadian treasury bond returns: An institutional explanation
Author(s) -
Athanassakos George,
Tian Yisong Sam
Publication year - 1998
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/s1058-3300(99)80146-3
Subject(s) - seasonality , treasury , bond , economics , government bond , quarter (canadian coin) , bond market , financial economics , bond market index , econometrics , monetary economics , finance , geography , mathematics , statistics , archaeology
This paper empirically investigates the seasonality in quarterly bond returns in the Canadian government bond market. Four equally weighted bond return indices were calculated for each quarter in the period from 1963:Q2 to 1990:Q3. The seasonality in these quarterly returns was tested and the results support the existence of seasonality in quarterly bond returns in the Canadian government bond market. It appears that bond returns in the last quarter of the year are significantly higher than in any other quarter of the year. This finding contrasts to the results in U.S. studies on Treasury bond returns. An institutional explanation is offered for the documented seasonality in bond returns, linking it to the annual Canada Savings Bond campaign in the last quarter of the year, a unique Canadian phenomenon. This hypothesis is supported by empirical evidence based on a regression analysis. Such finding is consistent with the fact that no seasonality in Treasury bond returns is found in the U.S., at the U.S. Savings Bonds are sold regularly throughout the year.