Short-term patterns in government bond returns following market shocks: International evidence

Konstantinos Kassimatis, Spyros Spyrou and Emilios Galariotis

International Review of Financial Analysis, 2008, vol. 17, issue 5, 903-924

Abstract: We employ government bond portfolios from 17 countries in order to investigate the short-run reaction of investors to price shocks. Our findings indicate a uniform return reversal pattern across countries, that persists irrespective of various robustness tests such as different datasets (Datastream/J.P. Morgan), different maturity bands, and day-of-the-week effects. Simulated trading strategies based on our results suggest that this pattern can be employed to generate economically significant profits for many country portfolios. We also demonstrate that significant zero-investment profits are possible even when instead of the expensive to replicate country bond portfolios we employ directly tradable and low transactions cost instruments, such as Bond Futures Contracts.

Keywords: Price; shocks; Government; bonds; Bond; futures (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:17:y:2008:i:5:p:903-924

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