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

Emilios C. Galariotis (), Spyros Spyrou and Konstantinos Kassimatis
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Emilios C. Galariotis: Audencia Recherche - Audencia Business School

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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: 2008-12
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Citations: View citations in EconPapers (7)

Published in International Review of Financial Analysis, 2008, 17 (5), pp.903-924. ⟨10.1016/j.irfa.2007.06.007⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00765471

DOI: 10.1016/j.irfa.2007.06.007

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