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Investigating excess returns from nominal bonds

Chadha, Jagjit S., Breedon, Francis (2003) Investigating excess returns from nominal bonds. Oxford Bulletin of Economics and Statistics, 65 (1). ISSN 0305-9049. (doi:10.1111/1468-0084.00043) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided) (KAR id:10968)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided.
Official URL:
http://dx.doi.org/10.1111/1468-0084.00043

Abstract

Estimated real returns on nominal bonds show excess returns of some 200 bp over their index-linked equivalent. This paper considers two possible explanations for this large difference. First, we assess the likely inflation risk premium by calibrating a model of optimal bond prices under uncertainty. Employing either of CRRA or Abel (1990) relative consumption utility function to derive the stochastic discount factor and covariation risk, we suggest that the inflation risk component of this excess return is unlikely to be much above 50 bp. Secondly, we find little evidence that these excess returns can be ascribed to consistent expectational errors in predicting inflation

Item Type: Article
DOI/Identification number: 10.1111/1468-0084.00043
Subjects: H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
Divisions: Divisions > Division of Human and Social Sciences > School of Economics
Depositing User: Jagjit Chadha
Date Deposited: 15 Sep 2008 15:17 UTC
Last Modified: 16 Nov 2021 09:49 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/10968 (The current URI for this page, for reference purposes)

University of Kent Author Information

Chadha, Jagjit S..

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