Time-varying risk and return in the bond market: a test of a new equilibrium pricing model

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dc.contributor.author Campbell, Cynthia
dc.contributor.author Campbell, Cynthia
dc.contributor.author Kazemi, Hossein
dc.contributor.author Nanisetty, Prasad
dc.contributor.department Finance
dc.date 2018-02-13T13:12:51.000
dc.date.accessioned 2020-06-30T03:58:02Z
dc.date.available 2020-06-30T03:58:02Z
dc.date.copyright Fri Jan 01 00:00:00 UTC 1999
dc.date.embargo 2013-08-05
dc.date.issued 1999
dc.description.abstract <p>This article uses bond market data to empirically test the asset pricing model of Kazemi (1992). According to this model the rate of return on a long-term, pure-discount, default-free bond will be perfectly correlated with changes in the marginal utility of the representative investor. The covariability between financial asset returns and returns on such a bond can therefore serve as a measure of the riskiness of assets. The aim of this study is to determine whether the model can explain cross-sectional differences in the monthly returns of bonds with different maturity dates. We estimate and test the restrictions imposed by the model on returns of default-free bonds, while allowing the conditional distribution of bond returns to be time varying. The model is rejected during the full sample period (1973-1995) and the subperiod (1973-1980) when the Federal Reserve's focus is on interest rates, while the model is not rejected during the subperiod (1981-1995) when the Federal Reserve's focus is on money supply.</p>
dc.description.comments <p>This is a preprint of an article published in <em>The Review of Financial Studies</em>. © 1999 The Society for Financial Studies. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. doi:<a href="http://dx.doi.org/10.1093/rfs/12.3.631" target="_blank">10.1093/rfs/12.3.631</a>.</p>
dc.format.mimetype application/pdf
dc.identifier archive/lib.dr.iastate.edu/finance_pubs/5/
dc.identifier.articleid 1005
dc.identifier.contextkey 4389667
dc.identifier.s3bucket isulib-bepress-aws-west
dc.identifier.submissionpath finance_pubs/5
dc.identifier.uri https://dr.lib.iastate.edu/handle/20.500.12876/37335
dc.language.iso en
dc.source.bitstream archive/lib.dr.iastate.edu/finance_pubs/5/1999_CampbellCJ_TimeVaryingRisk.pdf|||Sat Jan 15 00:31:31 UTC 2022
dc.source.uri 10.1093/rfs/12.3.631
dc.subject.disciplines Finance and Financial Management
dc.title Time-varying risk and return in the bond market: a test of a new equilibrium pricing model
dc.type article
dc.type.genre article
dspace.entity.type Publication
relation.isAuthorOfPublication 903095ab-a514-457c-a055-b85e33625148
relation.isOrgUnitOfPublication e2432527-158f-465f-8301-f4ab4c262f9b
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