IDEAS home Printed from https://ideas.repec.org/a/spr/sjobre/v52y2000i5d10.1007_bf03372625.html
   My bibliography  Save this article

Arbitrage und die Gültigkeit des Barwertprinzips im Markt für Bundeswertpapiere

Author

Listed:
  • Stefan Jaschke

    (Weierstraß-Institut für Angewandte Analysis und Stochastik)

  • Richard Stehle

    (Humboldt-Universität zu Berlin)

  • Stephan Wernicke

    (Bankgesellschaft Berlin AG)

Abstract

Summary The duality relation between arbitrage maximization and term structure regression suggests minimax regression. If short selling is possible, the arbitrage theory implies that the maximal fitting error is bounded by the size of transaction costs. If, on the other hand, short selling is not possible and capital gains and interest are taxed differently, then a tax clientele effect may exist and the present value equation may be inadequate as a regression equation. In the mid-eighties the price discrepancies among German government bonds are so large — compared to actual transaction costs that one can say that a single term structure that explains all prices of those bonds as present values does not exist. Imperfect data, round lot and short selling constraints cannot fully explain the observed price discrepancies. The size and persistence of the price discrepancies from the viewpoint of a tax-free investor suggests that the computation of implied zero bond prices from German government bonds in the whole period from 1977 to 1996 is incomplete without the consideration of taxes.

Suggested Citation

  • Stefan Jaschke & Richard Stehle & Stephan Wernicke, 2000. "Arbitrage und die Gültigkeit des Barwertprinzips im Markt für Bundeswertpapiere," Schmalenbach Journal of Business Research, Springer, vol. 52(5), pages 440-468, August.
    • Handle: RePEc:spr:sjobre:v:52:y:2000:i:5:d:10.1007_bf03372625
    DOI: 10.1007/BF03372625
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/BF03372625
    File Function: Abstract
    Download Restriction: no
    File URL: https://libkey.io/10.1007/BF03372625?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Chambers, Donald R. & Carleton, Willard T. & Waldman, Donald W., 1984. "A New Approach to Estimation of the Term Structure of Interest Rates," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 19(3), pages 233-252, September.
    2. Vasicek, Oldrich A & Fong, H Gifford, 1982. "Term Structure Modeling Using Exponential Splines," Journal of Finance, American Finance Association, vol. 37(2), pages 339-348, May.
    3. McCulloch, J Huston, 1971. "Measuring the Term Structure of Interest Rates," The Journal of Business, University of Chicago Press, vol. 44(1), pages 19-31, January.
    4. Ronn, Ehud I., 1987. "A New Linear Programming Approach to Bond Portfolio Management," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(4), pages 439-466, December.
    5. Stehle, Richard & Jaschke, Stefan R. & Wernicke, S., 1998. "Tax clientele effects in the German bond market," SFB 373 Discussion Papers 1998,11, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    6. Dermody, Jaime Cuevas & Prisman, Eliezer Z., 1993. "No Arbitrage and Valuation in Markets with Realistic Transaction Costs," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(1), pages 65-80, March.
    7. Jaime Cuevas Dermody & R. Tyrrell Rockafellar, 1991. "Cash Stream Valuation In the Face of Transaction Costs and Taxes," Mathematical Finance, Wiley Blackwell, vol. 1(1), pages 31-54, January.
    8. George M. CONSTANTINIDES & Jonathan E. INGERSOLL Jr., 2005. "Optimal Bond Trading With Personal Taxes," World Scientific Book Chapters, in: Sudipto Bhattacharya & George M Constantinides (ed.), Theory Of Valuation, chapter 6, pages 165-206, World Scientific Publishing Co. Pte. Ltd..
    9. Katz, Eliakim & Prisman, Eliezer Z., 1991. "Arbitrage, Clientele Effects, and the Term Structure of Interest Rates," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 26(4), pages 435-443, December.
    10. Jaime Cuevas Dermody & R. Tyrrell Rockafellar, 1995. "Tax Basis And Nonlinearity In Cash Stream Valuation," Mathematical Finance, Wiley Blackwell, vol. 5(2), pages 97-119, April.
    11. Basma Bekdache & Christopher F. Baum, 1994. "Comparing Alternative Models of the Term Structure of Interest Rates," Boston College Working Papers in Economics 271, Boston College Department of Economics.
    12. Jordan, James V, 1984. "Tax Effects in Term Structure Estimation," Journal of Finance, American Finance Association, vol. 39(2), pages 393-406, June.
    13. repec:bla:jfinan:v:43:y:1988:i:4:p:893-911 is not listed on IDEAS
    14. McCulloch, J Huston, 1975. "The Tax-Adjusted Yield Curve," Journal of Finance, American Finance Association, vol. 30(3), pages 811-830, June.
    15. Prisman, Eliezer Z., 1990. "A Unified Approach to Term Structure Estimation: A Methodology for Estimating the Term Structure in a Market with Frictions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 25(1), pages 127-142, March.
    16. Hodges, S. D. & Schaefer, S. M., 1977. "A Model for Bond Portfolio Improvement," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(2), pages 243-260, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Helmut Gründl & Richard Stehle & Thorsten Waldow, 2003. "Zur Vorteilhaftigkeit von Kapitallebensversicherungen gegenüber alternativen Anlageformen — Eine Analyse aus Anlegersicht," Schmalenbach Journal of Business Research, Springer, vol. 55(6), pages 549-577, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ioannides, Michalis, 2003. "A comparison of yield curve estimation techniques using UK data," Journal of Banking & Finance, Elsevier, vol. 27(1), pages 1-26, January.
    2. Stehle, Richard & Jaschke, Stefan R. & Wernicke, S., 1998. "Tax clientele effects in the German bond market," SFB 373 Discussion Papers 1998,11, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    3. Ehrhardt, Michael C. & Jordan, James V. & Prisman, Eliezer Z., 1995. "Tests for tax-clientele and tax-option effects in U.S. treasury bonds," Journal of Banking & Finance, Elsevier, vol. 19(6), pages 1055-1072, September.
    4. Lin, Bing-Huei, 1999. "Fitting the term structure of interest rates for Taiwanese government bonds," Journal of Multinational Financial Management, Elsevier, vol. 9(3-4), pages 331-352, November.
    5. Ram Bhar & Carl Chiarella, 1996. "Construction of Zero-Coupon Yield Curve From Coupon Bond Yield Using Australian Data," Working Paper Series 70, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    6. Linton, Oliver & Mammen, Enno & Nielsen, Jans Perch & Tanggaard, Carsten, 2001. "Yield curve estimation by kernel smoothing methods," Journal of Econometrics, Elsevier, vol. 105(1), pages 185-223, November.
    7. Clark, Ephraim & Lakshmi, Geeta, 2004. "Sovereign debt and the cost of migration: India 1990-1992," Journal of Asian Economics, Elsevier, vol. 15(1), pages 111-134, February.
    8. Bing-Huei Lin, 2002. "Fitting term structure of interest rates using B-splines: the case of Taiwanese Government bonds," Applied Financial Economics, Taylor & Francis Journals, vol. 12(1), pages 57-75.
    9. James M. Steeley, 2008. "Testing Term Structure Estimation Methods: Evidence from the UK STRIPS Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(7), pages 1489-1512, October.
    10. Julian Manzano & Jorgen Blomvall, 2004. "Positive forward rates in the maximum smoothness framework," Quantitative Finance, Taylor & Francis Journals, vol. 4(2), pages 221-232.
    11. Emma Berenguer-Carceles & Ricardo Gimeno & Juan M. Nave, 2012. "Estimation of the Term Structure of Interest Rates: Methodology and Applications," Working Papers 12.06, Universidad Pablo de Olavide, Department of Financial Economics and Accounting (former Department of Business Administration).
    12. Koo, B. & La Vecchia, D. & Linton, O., 2019. "Nonparametric Recovery of the Yield Curve Evolution from Cross-Section and Time Series Information," Cambridge Working Papers in Economics 1916, Faculty of Economics, University of Cambridge.
    13. Andraž, Grum, 2006. "Razvitost slovenskega trga dolžniškega kapitala in ocenitev krivulje donosnosti," MPRA Paper 4876, University Library of Munich, Germany.
    14. Liu, Sheen & Shi, Jian & Wang, Junbo & Wu, Chunchi, 2007. "How much of the corporate bond spread is due to personal taxes?," Journal of Financial Economics, Elsevier, vol. 85(3), pages 599-636, September.
    15. de Andres Sanchez, Jorge & Terceno Gomez, Antonio, 2004. "Estimating a fuzzy term structure of interest rates using fuzzy regression techniques," European Journal of Operational Research, Elsevier, vol. 154(3), pages 804-818, May.
    16. Pham, Toan M., 1998. "Estimation of the term structure of interest rates: an international perspective," Journal of Multinational Financial Management, Elsevier, vol. 8(2-3), pages 265-283, September.
    17. Koo, Bonsoo & La Vecchia, Davide & Linton, Oliver, 2021. "Estimation of a nonparametric model for bond prices from cross-section and time series information," Journal of Econometrics, Elsevier, vol. 220(2), pages 562-588.
    18. Barzanti, Luca & Corradi, Corrado, 1998. "A note on interest rate term structure estimation using tension splines," Insurance: Mathematics and Economics, Elsevier, vol. 22(2), pages 139-143, June.
    19. Oliver Linton & E. Mammen & J. Nielsen & C. Tanggaard, 1998. "Estimating Yield Curves by Kernel Smoothing Methods," Cowles Foundation Discussion Papers 1205, Cowles Foundation for Research in Economics, Yale University.
    20. Urs Beer, 1990. "Eine Methode zur Schätzung der Zinsstruktur in der Schweiz," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 126(I), pages 39-50, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:sjobre:v:52:y:2000:i:5:d:10.1007_bf03372625. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.