Does Time Varying Risk Premia Exist in the International Bond Market? An Empirical Evidence from Australian and French Bond Market

Hira Aftab and A. B. M. Rabiul Alam Beg
Additional contact information
Hira Aftab: Institute of Business & Information Technology, University of the Punjab, Lahore 54000, Pakistan
A. B. M. Rabiul Alam Beg: College of Business, Law & Governance, James Cook University, Townsville 4811, Australia

IJFS, 2021, vol. 9, issue 1, 1-13

Abstract: The presence of risk premium is an issue that weakens the rational expectation hypothesis. This paper investigates changing behavior of time varying risk premium for holding 10 year maturity bond using a bivariate VARMA-DBEKK-AGARCH-M model. The model allows for asymmetric risk premia, causality and co-volatility spillovers jointly in the global bond markets. Empirical results show significant asymmetric partial co-volatility spillovers and risk premium exist in the bond markets. The estimates of the bivariate risk premia show bi-directional causality exist between the Australia and France Bond markets. Overall results suggest nonexistence of pure rational expectation theory in the risk premium model. This information is useful for the agents’ strategic policy decision making in global bond markets.

Keywords: asymmetric volatility; risk premium; partial co-volatility spillovers; bond market; G1; C40; C13; C18 (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.mdpi.com/2227-7072/9/1/3/pdf (application/pdf)
https://www.mdpi.com/2227-7072/9/1/3/ (text/html)

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:gam:jijfss:v:9:y:2021:i:1:p:3-:d:474400

Access Statistics for this article

IJFS is currently edited by Ms. Hannah Lu

More articles in IJFS from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().