Return Generating Processes of Long-Term Bonds and Measurement of Risk: Theory and Empirical Tests.
Using a continuous-time framework, Kazemi (1992) shows that changes in prices of long-term bonds could be perfectly correlated with changes in the representative investor's marginal utility of wealth. Therefore, the equilibrium expected excess return on any security would be proportional to its covariance with changes in prices of long-term bonds. The present paper first extends the above result to a discrete time framework and shows that there are significant differences between the continuous time and discrete time versions of the model. Second, we test an empirical implication of this result; the evidence supports the theoretical model. Copyright 1995 by Kluwer Academic Publishers
Year of publication: |
1995
|
---|---|
Authors: | Kazemi, Hossein B ; Milonas, Nikolaos T ; Nanisetty, Prasad |
Published in: |
Review of Quantitative Finance and Accounting. - Springer. - Vol. 5.1995, 3, p. 231-40
|
Publisher: |
Springer |
Saved in:
Saved in favorites
Similar items by person
-
Time-Varying Risk and Return in the Bond Market: A Test of a New Equilibrium Pricing Model.
Campbell, Cynthia J, (1999)
-
Convenience Yield and the Option to Liquidate for Commodities with a Crop Cycle.
Milonas, Nikolaos T, (1997)
-
Liquidity and Price Variability in Futures Markets.
Milonas, Nikolaos T, (1986)
- More ...