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Time‐Varying Expected Returns in International Bond Markets
Author(s) -
ILMANEN ANTTI
Publication year - 1995
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.1540-6261.1995.tb04792.x
Subject(s) - predictability , bond , economics , excess return , government bond , econometrics , stock (firearms) , risk premium , forward rate , financial economics , bond market , monetary economics , interest rate , mathematics , statistics , geography , finance , context (archaeology) , archaeology
This article examines the predictable variation in long‐maturity government bond returns in six countries. A small set of global instruments can forecast 4 to 12 percent of monthly variation in excess bond returns. The predictable variation is statistically and economically significant. Moreover, expected excess bond returns are highly correlated across countries. A model with one global risk factor and constant conditional betas can explain international bond return predictability if the risk factor is proxied by the world excess bond return, but not if it is proxied by the world excess stock return.