SINGLE‐FACTOR DURATION MODELS: CANADIAN TESTS

G. O. Bierwag and Gordon S. Roberts

Journal of Financial Research, 1990, vol. 13, issue 1, 23-38

Abstract: Single‐factor duration models of bond returns are derived from an underlying stochastic process of the term structure of interest rates. It is shown that beta in these models is a function of the parameters of the stochastic process and of implied measures of duration. Using unsmoothed Canadian monthly prices on default‐free government bonds, the single‐factor duration model is found to perform well from 1963 to 1986, but the hypothesis of stationarity of the duration‐based bond returns model for the period cannot be accepted. Some of the underlying stochastic processes imply stationary models and some of them imply nonstationary bond return models. The models of this paper open the door to a variety of linear bond return models having a strong theoretical support based on a theory of the stochastic motion of the term structure.

Date: 1990
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1111/j.1475-6803.1990.tb00533.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfnres:v:13:y:1990:i:1:p:23-38

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-2592

Access Statistics for this article

Journal of Financial Research is currently edited by Jayant Kale and Gerald Gay

More articles in Journal of Financial Research from Southern Finance Association Contact information at EDIRC., Southwestern Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().