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Risk Aversion and the Pricing of Municipal Bonds
Author(s) -
Kriz Kenneth A.
Publication year - 2004
Publication title -
public budgeting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.694
H-Index - 30
eISSN - 1540-5850
pISSN - 0275-1100
DOI - 10.1111/j.0275-1100.2004.02402005.x
Subject(s) - municipal bond , risk aversion (psychology) , bond , yield (engineering) , economics , financial economics , expected utility hypothesis , finance , thermodynamics , physics
Risk aversion in the municipal bond market has been an assumption of most discussions regarding the municipal bond market, but has not been formally documented. The research in this article tests for the presence of risk aversion through comparing a risk‐neutral bond yield with the observed yields on municipal bonds. A significant level of risk aversion is found to exist in the municipal bond market.