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|Title:||The nonstationarity of systematic risk for bonds / BEBR No. 497|
|Author(s):||Jahankhani, Ali; Pinches, George E.|
|Contributor(s):||University of Illinois at Urbana-Champaign. College of Commerce and Business Administration|
|Issue Date:||July 20 19|
|Publisher:||[Urbana, Ill.] : College of Commerce and Business Administration, University of Illinois at Urbana-Champaign,|
|Series/Report:||Faculty working papers ; no. 497|
|Description:||Includes bibliographical references (leaves 25-27).
"Recently a number of researchers have attempted to employ the market model to estimate systematic risk (i.e., beta) for bonds. In this study we reviewed theoretical evidence which suggests bond betas can be expected to be nonstationary. This nonstationarity is a function of the duration of a bond, the standard deviation of the change in the yield to maturity of a bond relative to the standard deviation of the return on the market portfolio, and the correlation between the change in the yield to maturity of a bond and the return on the market portfolio. However, all bonds will not necessarily have nonstationary betas in a given time period since it is possible that these factors may occasionally counteract one another."
"Empirical tests indicated that over 80 percent of the bonds examined had nonstationary betas. The primary factor differentiating bonds with nonstationary betas from those with stationary betas was the substantially higher relative standard deviation in the change in the yield to maturity for bonds with nonstationary betas. The larger standard deviation was caused by the higher average coupon rates and yields to maturity for bonds with nonstationary betas. The theoretical and empirical results of this study indicate bond betas, in general, tend to be nonstationary. Hence, fruther use of them appears to be of very questionable value."
|Rights Information:||Copyright July 20 1978 Board of Trustees University of Illinois.|
|Date Available in IDEALS:||2011-09-15|
|Identifier in Online Catalog:||321436|
This item appears in the following Collection(s)
Research publications from the University of Illinois at Urbana-Champaign
Research Publications from UIUC