The Consideration of Coupon Levels, Taxes, Reinvestment Rates, and Maturity in the Investment Management of Financial Institutions

Robert H. Cramer and Stephen L. Hawk

Journal of Financial and Quantitative Analysis, 1975, vol. 10, issue 1, 67-84

Abstract: The investment managers of financial institutions face a multiplicity of factors that influence the performance of fixed coupon securities in their investment portfolios. These factors can be classified under three headings:1) Condition of the economy–changes in interest rate levels and spreads;2) Nature of the financial institution–institution's tax rate, economic factors such as deposit variability and loan demand for banks, and premium inflow and benefit payments for insurance companies;3) Characteristics of individual securities–(a) their attractiveness in terms of risk level and marketability; and (b) their contractual factors (coupon level and maturity) and tax status.

Date: 1975
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