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Explorations Into Factors Explaining Money Market Returns
Author(s) -
KNEZ PETER J.,
LITTERMAN ROBERT,
SCHEINKMAN JOSÉ
Publication year - 1994
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1994.tb04784.x
Subject(s) - economics , econometrics , variation (astronomy) , interpretation (philosophy) , factor analysis , factor (programming language) , financial economics , money market , measure (data warehouse) , monetary economics , interest rate , computer science , physics , astrophysics , programming language , database
In this article, we measure and interpret the common “factors” that describe money market returns. Results are presented for both three‐and four‐factor models. We find that the three‐factor model explains, on average, 86 percent of the total variation in most money market returns while the four‐factor model explains, on average, 90 percent of this variation. Using mimicking portfolios, we provide an interpretation of the systematic risks represented by these factors.