Risk and return in the bond markets: Past developments and future prospects

Arbeitspapier

The paper examines the past risk and return trade-off on the US bond market, and uses this as a basis for developing a flexible tool based on simulation of principal components to evaluate future prospects for risk and returns for investors. The principal components of the yield curve are related to a few main macro-economic drivers (inflation and real GDP-gap). This allows simulation of yields curves based on expectations about the future behaviour of the macro-economic drivers, rather than relying solely on parameters estimated from historic data. The overall conclusion is that since 1960 the US-bond market has rewarded risk in the sense that more volatile bond returns has been associated with higher average realized returns. However, this covers very large variation over sub-periods, and in periods with increasing yield trend extra risk has not always been rewarded. In the simulations of the future risk-return trade-off, there are lower excess returns from enhancing the duration exposure in the future relative to the near past. However, the risk associated with duration enhancing is also lower.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Danmarks Nationalbank Working Papers ; No. 40

Klassifikation und Themen

• Klassifikation: Wirtschaft

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Andersen, Allan Bødskov ; Hansen, Jakob Lage
• Ereignis: Veröffentlichung
• (wer): Danmarks Nationalbank
• (wo): Copenhagen
• (wann): 2006

Weitere Informationen

• Handle: http://hdl.handle.net/10419/82345
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ