Performance of Bond Ladder Strategies: Evidence from a Period of Low Interest Rates
Prof. Dr. Christoph Schmidhammer ()
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Prof. Dr. Christoph Schmidhammer: Deutsche Bundesbank University of Applied Sciences, 57627 Hachenburg
Credit and Capital Markets, 2018, vol. 51, issue 3, 421-444
Based on German government bond yields, this paper analyses the performance of laddered strategies during a period of low interest rates. Relying on the REX, Germany’s leading bond index, laddered cash flows are created, and maturity structures are systematically changed. A constructed rolling window of annual returns reveals that risk and return significantly increase with the length of maturity. Performance measures, such as return on risk-adjusted capital and the Sharpe ratio, show that long-term bond ladders significantly dominate short-term ladders. However, for upward movements in the average yield level, the dominance is reduced. The results imply that portfolio managers should consider performance characteristics in maturity decisions as well as expectations of changes in the yield level.
Keywords: Bond Ladders; Return; Risk; Performance; RORAC; Sharpe Ratio; Maturity; Fixed-Income Portfolios; Period of Low Interest Rates (search for similar items in EconPapers)
JEL-codes: E43 G11 G12 G21 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:kuk:journl:v:51:y:2018:i:3:p:421-444
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