Search

Municipal bond markets began pricing sea-level rise (SLR) exposure risk in 2013, coinciding with upward revisions to worst-case SLR projections and accompanying uncertainty around these projections. The effect is larger for long-maturity bonds and not solely driven by near-term flood risk. We use a structural model of credit risk to quantify the implied economic impact and distinguish between the effects of underlying asset values and of uncertainty. The SLR exposure premium exhibits a trend different from house prices and is unaffected by house price controls. Together, our results highlight the importance of climate uncertainty in driving municipal bond prices. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online [ABSTRACT FROM AUTHOR]

We examine the role of macroeconomic uncertainty in the cross section of corporate bonds and find a significant uncertainty premium for both investment-grade (IG) (0.40% per month) and non-investment-grade (NIG) (0.81% per month) bonds. The economic-uncertainty premium declines as we progressively remove downgraded bonds, indicating that the premium represents an increase in required returns for bonds with higher credit and macroeconomic risk. The economic-uncertainty premia vary across equities and bonds in a manner consistent with the heterogeneous risk-aversion levels of dominant players in equities (retail investors) versus bonds (institutional investors). [ABSTRACT FROM AUTHOR]

Beliefs of professional forecasters are benchmarked against those of a Bayesian econometrician BE who is learning about the unknown dynamics of the bond risk factors. Consistent with rational Bayesian learning, the forecast errors of individual professionals and BE are comparably predictable over the business cycle. The secular and cyclical patterns of professionals' forecasts relative to those of BE are explored in depth. Inconsistent with many models with belief dispersion, the relationship between professionals' yield disagreement and their matched disagreements about macroeconomic fundamentals is very weak. [ABSTRACT FROM AUTHOR]

The study was conducted with the view to test the impact of cash out flow from the Pakistan Prize Bond market to Gold and Silver markets as a result of the bonds' draw. The data from July 2007 to June 2019 was selected, which included Returns of Gold and Silver Markets. The data was tested with Event Study and AR, AAR & CAR were calculated. The results of AR & CAR did not endorse both the hypotheses on the basis that significant readings were found both in pre and post draw dates, to rule out any impact of cash flow from Prize Bond market into Gold and Silver markets. Whereas, AAR results were insignificant as such, hence fortifying the inference of rejection of both the hypotheses. So, both the hypotheses of having different returns on prize bond draw dates in Gold and Silver markets were not supported. Though the results were incongruent with the hypotheses, yet study outcomes as such are significant enough to propose regulators to contemplate legislations to fetch more funds from this comparatively cheaper source through enhanced documentation, which ultimately would make the economy more compliant. [ABSTRACT FROM AUTHOR]

In this study, using data from 46 markets and a 34-year time period, we examine the impact of the illiquidity of U.S. Treasuries on global asset valuation. We find that it predicts equity returns in both developed and emerging markets. This predictive relation remains intact after controlling for various world- and country-level variables. Asset pricing tests further reveal that bond illiquidity is a priced factor even in the presence of other conventional risks. Since the illiquidity of Treasuries is known to reflect monetary and macroeconomic shocks, our results suggest that it can be considered a proxy for aggregate worldwide risks. [ABSTRACT FROM PUBLISHER]

Standard approaches to building and estimating dynamic term structure models rely on the assumption that yields can serve as the factors. However, the assumption is neither theoretically necessary nor empirically supported. This article documents that almost half of the variation in bond risk premia cannot be detected using the cross-section of yields. Fluctuations in this hidden component have strong forecast power for both future short-term interest rates and excess bond returns. They are also negatively correlated with aggregate economic activity, but macroeconomic variables explain only a small fraction of variation in the hidden factor. [ABSTRACT FROM PUBLISHER]

Previous studies document that the stock returns of bond-issuing firms significantly underperform matched peers over the three to five years following issuance. We revisit this phenomenon and show that the underperformance is the result of an omitted return factor (a “bad model problem”). Debt issuers have significantly higher stock market liquidity than size and book-to-market matched counterparts, and differences in liquidity are largest for the worst-performing groups of issuers. When we additionally match on liquidity or when we include a liquidity factor in the model for expected returns, the evidence of underperformance disappears. [ABSTRACT FROM PUBLISHER]

We document that: (1) the incidence of bond trade increases during the days surrounding earnings announcements, (2) there is a bond-price reaction to the announcement of earnings, and (3) there is a positive association between annual bond returns and both annual changes in earnings and annual analysts' forecast errors. All of these effects are larger when earnings convey bad news or when the underlying bond is more risky. Taken together, our results suggest that the nonlinear payoff structure of bond securities affects the role of accounting earnings in the bond market. [ABSTRACT FROM AUTHOR]

What drives the compensation demanded by investors in risky bonds? Longstaff and Schwartz (1995) predict that one key factor is the time-varying negative correlation between interest rates and the yield spreads on corporate bonds. However, the effects of callability and taxes also need to be considered in empirical analyses. Canadian bonds have no tax effects, yet, after controlling for callability, the correlation between riskless interest rates and corporate bond spreads remains negligible. Our results provide support for reduced-form models that explicitly define a default hazard process and untie the relation between the firm's asset value and default probability. [ABSTRACT FROM AUTHOR]

We examine the yield curve behavior and the relative performance of affine term structure models (ATSMs) using government bond yield data from Canada, Germany, Japan, the U.K., and the U.S. We find strong predictability of forward rates for excess bond returns and reject the expectations hypothesis in all five countries. A three-factor model is sufficient to capture movements in the yield curve of Canada, Japan, the U.K., and the U.S., but may not be enough for Germany. An exhaustive comparison among ATSMs with no more than three factors reveals that the three-factor essential affine model (A1(3)E), with only one factor affecting the volatility of the short rate but with all three factors affecting the price of risk, performs best in all five countries. Simulations provide inconclusive evidence on whether this best affine model can successfully generate the rich yield curve behavior observed in the data. [ABSTRACT FROM AUTHOR]

One of the more puzzling results in the expectations hypothesis (EH) testing literature is the Campbell-Shiller paradox (CSP). In an influential paper, Campbell and Shiller (1991) found that "the slope of the term structure almost always gives a forecast in the wrong direction for the short-term change in the yield on the longer bond, but gives a forecast in the right direction for long-term changes in short rates." This paper provides an econometric resolution to the CSP. Specifically, it shows that, by their construction, these tests can generate results consistent with the CSP if the EH does not hold—whatever the reason. Monte Carlo experiments confirm that this explanation can account for Campbell and Shiller's paradoxical results for most pairings of short-term and long-term rates considered. [ABSTRACT FROM AUTHOR]

We use the information in credit default swaps to obtain direct measures of the size of the default and nondefault components in corporate spreads. We find that the majority of the corporate spread is due to default risk. This result holds for all rating categories and is robust to the definition of the riskless curve. We also find that the nondefault component is time varying and strongly related to measures of bond-specific illiquidity as well as to macroeconomic measures of bond market liquidity. [ABSTRACT FROM AUTHOR]

This article explores cross-market liquidity dynamics by estimating a vector autoregressive model for liquidity (bid-ask spread and depth, returns, volatility, and order flow in the stock and Treasury bond markets). Innovations to stock and bond market liquidity and volatility are significantly correlated, implying that common factors drive liquidity and volatility in these markets. Volatility shocks are informative in predicting shifts in liquidity. During crisis periods, monetary expansions are associated with increased liquidity. Moreover, money flows to government bond funds forecast bond market liquidity. The results establish a link between "macro" liquidity, or money flows, and "micro" or transactions liquidity. [ABSTRACT FROM AUTHOR]

This paper explores the effect of equity volatility on corporate bond yields. Panel data for the late 1990s show that idiosyncratic firm-level volatility can explain as much cross-sectional variation in yields as can credit ratings. This finding, together with the upward trend in idiosyncratic equity volatility documented by, helps to explain recent increases in corporate bond yields. [ABSTRACT FROM AUTHOR]

Most term structure models assume bond markets are complete, that is, that all fixed income derivatives can be perfectly replicated using solely bonds. However, we find that, in practice, swap rates have limited explanatory power for returns on at–the–money straddles—portfolios mainly exposed to volatility risk. We term this empirical feature “uu” (USV). While USV can be captured within an HJM framework, we demonstrate that bivariate models cannot exhibit USV. We determine necessary and sufficient conditions for trivariate Markov affine systems to exhibit USV. For such USV models, bonds alone may not be sufficient to identify all parameters. Rather, derivatives are needed. [ABSTRACT FROM AUTHOR]

In this paper, I use institutional corporate bond trade data to estimate transactions costs in the over-the-counter bond market. I find average round-trip trading costs to be about $0.27 per $100 of par value. Trading costs are lower for larger trades. Small institutions pay more to trade than large institutions, all else being equal. Small bond dealers charge more than large ones. I find no evidence that trading costs more for lower-rated bonds. [ABSTRACT FROM AUTHOR]

The purpose of this article is to explain the spread between rates on corporate and government bonds. We show that expected default accounts for a surprisingly small fraction of the premium in corporate rates over treasuries. While state taxes explain a substantial portion of the difference, the remaining portion of the spread is closely related to the factors that we commonly accept as explaining risk premiums for common stocks. Both our time series and cross-sectional tests support the existence of a risk premium on corporate bonds. [ABSTRACT FROM AUTHOR]

Methodological approaches for conducting an operational cost analysis of banks' interest-bearing assets have been developed in the research. The correlation between the components of banking products price and the profitability (loss) of Ukrainian banks has been determined. The Ukrainian banks have been grouped according to the level of return on the shareholders’ equity. They have been divided into planes according to the share in the credit market and the share of profit in the price. The analysis shows that the most profitable banks have a high capital multiplier and a high level of non-interest income that is not exposed to credit risk. On this basis, depending on the share in the credit market and the share of profit in the price, the recommendations for target pricing strategies have been justified, taking into account the risk-weighted return on equity ratio. [ABSTRACT FROM AUTHOR]

In this article, we develop relative pricing (APT) models that are successful in explaining expected returns in the bond market. We utilize indexes as well as unanticipated changes in economic variables as factors driving security returns. An innovation in this article is the measurement of the economic factors as changes in forecasts. The return indexes are the most important variables in explaining the time series of returns. However, the addition of the economic variables leads to a large improvement in the explanation of the cross-section of expected returns. We utilize our relative pricing models to examine the performance of bond funds. [ABSTRACT FROM AUTHOR]

A new empirical model for intertemporal capital asset pricing is presented that allows both time-varying risk premia and betas where the latter are identified from the dynamics of the conditional covariance of returns. The model is more successful in explaining the predictable variations in excess returns when the returns on the stock market and corporate bonds are included as risk factors than when the stock market is the single factor. Although changes in the covariance of returns induce variations in the betas, most of the predictable movements in returns are attributed to changes in the risk premia. [ABSTRACT FROM AUTHOR]

This paper presents an aging analysis of 741 high yield bonds and finds default, exchange, and call percentages substantially higher than reported in earlier studies. By December 31, 1988, cumulative defaults are 34 percent for bonds issued in 1977 and 1978 and range from 19 to 27 percent for issue years 1979-1983 and from 3 to 9 percent for issue years 1984-1986. Exchanges are also a significant factor although they often are followed by default. Moreover, a significant percentage of high yield debt, 26-47 percent for 1977-1982, has been called. By December 31, 1988, approximately one third of the bonds issued in 1977-1982 has defaulted or been exchanged, and an additional one third had been called. On average, only 28 percent of these issues are still outstanding. There is no evidence that early results for more recent issue years differ markedly from issue years 1977 to 1982. [ABSTRACT FROM AUTHOR]

In this paper, we develop a model for valuing debt options that takes into account the changing characteristics of the underlying bond by assuming that the standard deviation of return is proportional to the bond's duration. The resulting model uses the bond price as the single state variable and thus preserves much of the simplicity and robustness of the Black-Scholes approach. The paper provides comparisons between option prices computed using this model and those using the Black-Scholes and Brennan and Schwartz models. [ABSTRACT FROM AUTHOR]

This paper discusses the pricing of assets in an intertemporal rational-expectations model when real production and inflation evolve according to first-order autocorrelated processes. The focus is on the structure of the various intertemporal discount rates (yields) exhibited by this economy. Yield curves are identified for consumption claims, indexed bonds, and nominally riskless bonds and can be extended to any claim that can be approximated by a (finite) linear combination of such securities. The model demonstrates that, if the average term structure for nominally riskless securities is upward sloping, then the yield curve for consumption (market) claims is downward sloping, suggesting that conventional methods for computing long-term discount rates err by not accounting for maturity factors. The paper also explores the relationship between the intertemporal equilibrium and its embedded single-period equilibria. The single-period risk measures in this economy are derived and shown to be (generally) functions of maturity. A model of nominal bond betas is constructed along these lines. It is shown that bond betas that are increasing functions of maturity do not necessarily imply an upward-sloping term structure. [ABSTRACT FROM AUTHOR]

This study explores the role of the method of payment in explaining common stock returns of bidding firms at the announcement of takeover bids. The results reveal significant differences in the abnormal returns between common stock exchanges and cash offers. The results are independent of the type of takeover bid, i.e., merger or tender offer, and of bid outcomes. These findings, supported by analysis of nonconvertible bonds, are attributed mainly to signalling effects and imply that the inconclusive evidence of earlier studies on takeovers may be due to their failure to control for the method of payment. [ABSTRACT FROM AUTHOR]

This paper provides evidence that changes in government bond yields clearly affect ex post returns to electric utilities, and that this phenomenon is concentrated to a much larger extent in this particular industry than in NYSE firms as a whole (Table I). Evidence of the pricing is provided within the framework of the APT. Empirical work employed a pooled cross-section approach using a nonlinear constrained version of FIML estimation. [ABSTRACT FROM AUTHOR]

Empirical tests are reported for Ross' arbitrage pricing theory using monthly data for U.S. Treasury securities during the 1960-1979 period. We find that mean returns on bond portfolios are linearly related to at least two factor loadings. Multivariate test results, however, are not consistent with the APT. Our sample data in the U.S. Treasury securities market are also not consistent with either version of the CAPM. One-month-ahead forecasts of excess returns using factor-generating models are compared with corresponding naive predictions or predictions using the "market model" with various market portfolios. [ABSTRACT FROM AUTHOR]

This paper traces the historical developments of the efforts to find simple and accurate methods of approximating an annuity's implicit yield and a bond's yield to maturity. It is shown that the little known history of yield approximations is nevertheless very rich, with contributions dating as far back as the late seventeenth century. It is also shown that the standard textbook approximation formula for the bond's yield to maturity is the least accurate of a large family of formulas, some of which were suggested as early as 1855. [ABSTRACT FROM AUTHOR]

There have been a number of studies of the price/yield behavior of newly-issued corporate bonds. These studies find that there are systematic differences in yield to maturity between newly-issued bonds and bonds that have been outstanding for some time. Typically, new issues have higher yields and these differences are usually found to persist for some time after issue. Authors realize that such differences are inconsistent with an efficient bond market and usually explain these differences by appeal to various assumed market imperfections, such as a "thin" market in seasoned issues. In this paper we approach the question of differences between new and seasoned issues by concentrating on holding-period returns (coupon plus capital gain) instead of the more usual yield to maturity. That is, we ask whether there are differences in holding period returns between seasoned and unseasoned bonds. The paper is organized as follows: Section I briefly surveys the literature on the seasoning process and develops our approach; Section II develops the hypotheses and describes our test procedure; Section III describes the data used and the results of our tests and Section IV discusses the implications of our findings. [ABSTRACT FROM AUTHOR]

Observed differentials among yield series for different types of long-term instruments—U.S, government bonds, municipal bonds, corporate bonds and residential mortgages—vary considerably over time. Many factors can contribute to observed long-term yield spreads, the most important of which are "technical" factors that relate to differences in the particular characteristics of instruments or in the investors that purchase them. These include the tax status of various types of income accruing to the security and the degree of certainty associated with that income. Long-term yield spreads might also be affected by relative security supplies and relatively exogenous demands, e.g., Federal agency demands for residential mortgages, particularly if institutional constraints on permissible yields or on the various sectors that purchase the long-term instruments exist. Failure to consider the effects of all of these factors has frequently created misunderstanding both in the financial press and in academia about the causes of observed yield spreads. For example, attempts have been made to measure the impact on long-term yield spreads of individual factors—such as default risk or relative security supplies—by comparing yield series without proper regard for the concurrent impact of other technical and/or fundamental factors. This paper deals exclusively with long-term corporate and U.S. government bond yields. The most widely used series are Salomon Brother's Aa deferred call new issue utility yield and the Federal Reserve Bulletin's average yield on bonds maturing or callable in 10 years or more. The spread between these series is shown as the solid line in Chart 1. (The dashed line will be discussed later.) The spread has moved over a wide range, rising sharply from 40 basis points in late 1965 to 235 basis points in the second quarter of 1970, subsequently falling to 140 basis points in early 1973, and then rising to almost 300 b... [ABSTRACT FROM AUTHOR]

The existence of humpbacked bond yield curves has been well documented. Yet theoretical explanations of this phenomenon have been deficient. The pure expectations hypothesis can explain humpbacked curves to be the result of a series of rising and then falling forward rates. But this explanation suffers from the drawbacks of the expectations hypothesis that have been pointed out in the literature. This paper offers a new explanation of humpbacked curves that builds upon the work of Malkiel [3]. It will be shown below that humpbacked curves may occur if the distributions of interest rates expected to prevail one period hence are skewed. [ABSTRACT FROM AUTHOR]

Theory suggests that two bonds which are comparable in all respects should offer investors the same yield. However, the yields of new corporate bonds often differ substantially from almost identical seasoned (outstanding) bonds. The most extensive work investigating this difference in yields between new and seasoned bonds (yield spread) was done by Conard and Frankena (3). Their primary finding was that differences in coupon rates between new and seasoned bonds of equal quality (Aa Public Utility) accounted for about one-half the yield spread. Because of this finding, equal quality new and seasoned bonds with the same coupon rates are used in the present study. [ABSTRACT FROM AUTHOR]

In summary, a method for factoring out the coupon effect on yield to maturity has been proposed that has several empirical advantages. The proposed approach can also be used to verify the correct specification of the coupon variable in regression models of the term structure that use yields to maturity as the dependent variable. If the model to be estimated indicates coupon effects contrary to those of the analysis presented here, the model is misspecified. The researcher could respecify his model or note the coupon bias in his interpretation of the results. The analysis presented shows that the observed differences in yield to maturity of different coupon bonds don't imply market disequilibrium. Any coupon preferences that various investors may have cannot upset market equilibrium; temporary aberrations provide opportunities for arbitrage profits which (presumably) would cause a prompt return to equilibrium. Since the "risk" of an investment in a default-free bond is a function of its coupon, it is incorrect to attribute the coupon effect solely to the "tax advantage" of low coupon bonds. Finally, the coupon effect analysis given here demonstrates that "yield to maturity" is not a meaningful concept: the relevant economic phenomena are the market prices of annuities and discounted notes. [ABSTRACT FROM AUTHOR]

The article examines the tax-adjusted yield curve. Tax-induced bias can substantially alter the shape of the yield curve if it is constructed from quotations on bonds selling below par. The inclusion of tax effects can actually reverse qualitative conclusions concerning the direction in which investors expect interest rates to move under the expectations hypothesis. The article modifies the author's technique for regression fitting the term structure of interest rates, described in an earlier paper, to eliminate tax-induced bias and reconcile observations on high and low coupon bonds.

The article presents a re-interpretation of the duration problem associated with calculating the yield curve of bonds, which relates bond yields to their terms to maturity. The presence of coupon payments introduces the complication of duration, the effects of which arise from the use of the incorrect discounting formula. The authors briefly discuss duration, the biasing effect it has on the formulation of the yield curve, and a technique for to correct for the duration problem. The inverse relationship between observed yields on stocks and dividend payments is explained.

The article reports on the cyclical relationships in the municipal market through empirical research of the determinants of the relative yield spread RYS. RYS is equal to the absolute difference between a bond's yield and a bond yield index, divided by the bond yield index. Municipal risk spreads can vary over a business cycle because the risk of default of agencies can rise depending on business conditions, investor risk aversion can vary, and the behavior of financial institutions in the municipal market varies.

Recent models of herding suggest that speculators may rationally trade on information unrelated to fundamentals when their trading horizons are short. This study provides an empirical example where this appears to be the case. Johnson Redbook's weekly retail sales figures predicted bond returns for a short time after a significant number of bond traders began purchasing and trading on the data. The significant relationship between the data and bond returns disappeared just after the Wall Street Journal started to report it. Meanwhile, there was little or no change in the relationship between the data and retailers' stock returns, perhaps because the data have long been followed by retail stock analysts, Johnson Redbook's original investor clientele. [ABSTRACT FROM AUTHOR]

This article examines the unobservable rate of return on money balances as depending directly on transactions velocity of money. The authors provides data to support the efficient markets hyphothesis (EMH). The author contends the results have three consequences. It adds support at the macroeconomic level for the EMH and it shows that the opportunity cost of holding money balances is the rate of return on bonds. Third, since the present results support the EMH, it also supports the rational expectations hypothesis (REH) and so much of the current macroeconomic modeling must be reconsidered.

In this paper prices of corporate bonds are decomposed into elements associated with (1) the pure price of time, (2) the default risk of the agency rating class to which the bond is assigned, and (3) the unique risk and ancillary features of the bond itself. [ABSTRACT FROM AUTHOR]

The article investigates the behavior of Eurobond yields. Empirical data are analyzed for January 1968 through June 1977, a period that encompasses a transition from fixed to floating rates, as well as the relaxation of capital controls. Several conclusions emerge. Eurobond yields follow a random walk. The change from a fixed rate to a floating-rate system had no impact on the level of yield changes, nor did the lifting of capital controls. In all circumstances the chief determinants of Eurobond yields were foreign bond yields and the U.S. bond rate.

The article focuses on an analysis of the relationship between underwriter spread and the pricing of municipal bonds. The purpose of this study is to test and analyze the relationship between reoffering yields for new municipal bond issues and the spread which the underwriter plans to receive. This study is different from past studies in method of analysis, and in being the first study to examine underwriter behavior in the bond market. Previous empirical studies of underwriter behavior in simultaneously deciding upon spread and offering prices for new issues and secondary distributions of common stocks have been conducted by Mendelson, Logue, Lindvall, and Stoll.

The article discusses the basic yields from corporate bonds in the U.S. during the period 1952-1957. The yield series first examines a short period right after the Republicans came into power in the spring and summer of 1953. Next, a period beginning in the middle of 1956 and lasting until 1957 is examined, which the author states is more dramatic and longer. The article also discusses the uncertainty of short-term basic yields, basic yields and time series, and the implied forecasts of future yields. Several tables and equations are provided to help illustrate the study.

This article presents information on the determinants of municipal bond yields. The author examines the determinants of the structure of municipal bond yields and provides empirical evidence from tests that were conducted to measure the impact of these factors on the yields. The author is interested in understanding why the yields from one state may be different from another state's bond yields. The findings indicate that bond yields are a result of the bond's default risk and marketability. The author discusses the situations where each of these factors plays the more significant role.

In this paper, a modified Black–Scholes (B–S) model is proposed, based on a revised assumption that the range of the underlying price varies within a finite zone, rather than being allowed to vary in a semi-infinite zone as presented in the classical B–S theory. This is motivated by the fact that the underlying price of any option can never reach infinity in reality; a trader may use our new formula to adjust the option price that he/she is willing to long or short. To develop this modified option pricing formula, we assume that a trader has a view on the realistic price range of a particular asset and the log-returns follow a truncated normal distribution within this price range. After a closed-form pricing formula for European call options has been successfully derived, some numerical experiments are conducted. To further demonstrate the meaning of the proposed model, empirical studies are carried out to compare the pricing performance of our model and that of the B–S model with real market data. [ABSTRACT FROM AUTHOR]

An increasingly important role is played by small and medium enterprises (SMEs) in our economy, so in order to broaden the market and seek more stable returns on the investments, commercial banks are bound to regard the SMEs' credit market as an importantly developing area. Bank is a special enterprise operating currency businesses, so it must be faced with various types of risks, particularly credit risk. Combined with unique characteristics of SMEs, the credit risk of SMEs is more difficult to control. There is no doubt that to enhance the credit risk management of SMEs will not only affect the banks' business performance and competitiveness, but also be related to the security of bank assets. In this paper, we investigate the multiple attribute decision making problems with picture fuzzy information. Then, we utilize induced OWG (IOWG) operator to develop picture fuzzy induced OWG (PFIOWG) operators. The prominent characteristic of this proposed operator are studied. And, we have utilized the PFIOWG to solve the picture fuzzy multiple attribute decision making problems. Finally, a practical example for evaluating the enterprise risk management is given. [ABSTRACT FROM AUTHOR]

Studies investigating the relation between risk and return occupy an important place in the discussion about the effectiveness of investing in real estate. A review of the available studies shows that real estate investments are less profitable than stocks, but in terms of risk and return, are usually the best option. This worldwide regularity may not necessarily be presented in Poland, as the Polish market is not fully fledged yet. The analysis presented in this article was performed with a view to reducing a research gap resulting from the lack of comprehensive Polish studies in this field. In the article, data spanning the years from 2006 to 2016 are examined by means of descriptive statistics, measures of risk, and the analysis of variance (ANOVA) to determine which of the following investment vehicles - bonds, real estate or stocks - offer the best risk-return ratio. The article has two parts. The analytical part is a review of studies on risk measurement methods and of earlier studies investigating risk and return by a class of assets (particularly real estate). In the empirical part, assets are compared with the use of statistical methods. The results of the risk-return analysis point to the money market as the best option for investors. Stocks and real estate ranked second and third, respectively. [ABSTRACT FROM AUTHOR]

The on-the-run phenomenon is regularly found in the bond markets. It refers to the phenomenon of the yield difference observed when a new bond issue comes to market from the same issuer and gets a better price (lower yield given equivalent duration) from the market than the older issue. This paper proposes and tests a liquidity model to explain phenomenon introducing entropy as our liquidity measure. The yield differential results from the illiquidity cost of the older issue that has increased as a result of progressing through stages, which typically occur in an entropy process. We find that a model employing an entropy measure largely explains the on-the-run phenomenon, by accounting for over three-quarters of the liquidity differential for on-the-run corporate bonds. [ABSTRACT FROM AUTHOR]

Both states that constituted the Austro-Hungarian Monarchy issued considerable amounts of perpetual bonds from the 1870s to World War I. These bonds constituted the greater part of the state debt, which was relatively larger in Hungary than in Austria. Movements in bond prices were not uniform for different kinds of securities such as gold bonds, paper bonds and bonds of the common debt of the pre-1867 era. Price movements and movements in the spread between Hungarian and Austrian bond yields followed a stochastic trend. Most fiscal factors such as the share of the state debt, and of state expenses, in GDP, the share of state consumption in overall state expenses, the relation between the debt service and the tax revenues, or the deficit in the state budget, had little or no impact. The conversion of debt instruments reveals a high degree of efficiency on the part of investors. Political crises affected relative price movements in the short run but were unimportant in the context of the middle- and long-term development. Throughout the period, Hungarian bonds as compared to Austrian bonds had lower prices in the Vienna Stock Exchange, suggesting a preference of Viennese investors for domestic securities independently from economic and political circumstances. [ABSTRACT FROM PUBLISHER]

We examine the value of Eastern European emerging bond markets to global fixed income managers. In an environment where bonds from traditional developed markets are offering modest yields, emerging market bonds with attractive yields are becoming more popular with institutional managers. Furthermore, the returns on these bonds exhibit low correlations with traditional fixed income investments and thus offer opportunities for portfolio diversification. We develop a multifactor forecasting model and estimate its parameters using a dynamic Kalman filter procedure. The forecasts are then used to construct optimal mean–variance portfolioswithandwithoutemerging market bonds. We find that the portfolios that include emerging market bonds have significantly higher Sharpe ratios. [ABSTRACT FROM AUTHOR]

The article discusses the relationship between a bond's duration and the yield curve. That a bond's coupon affects its maturity has been acknowledged and commented upon by several authors. Some commentators have expressed the belief that yields are a function of a bond's duration, while others have asserted that the two are completely unrelated. The author presents analysis that shows while duration is a function of the yield curve, the opposite is not true. Given two bonds that always have the same duration and yields to maturity, the entire yield curve from the first two forward rates can be recursively constructed.

Bond skewness and coskewness (i.e., bond return comovement with market volatility) are both time varying, with cross-sectional variation driven by maturity and credit rating. Other things being equal, longer maturity bonds have lower skewness, and lower coskewness with respect to the bond market index; lower quality bonds have lower skewness, and higher coskewness with respect to the bond market index. Three-moment bond alphas (which account for coskewness effects) are time varying and predictable by market default spread. They are significantly different from, and often are closer to zero than, two-moment alphas (which ignore coskewness effects). [ABSTRACT FROM AUTHOR]