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A Variance Decomposition of Index-Linked Bond Returns

Author

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  • Francis Breedon

    (Queen Mary, University of London)

Abstract

We undertake a variance decomposition of index-linked bond returns for the US, UK and Iceland. In all cases, news about future excess returns is the key driver though only for Icelandic bonds are returns independent of inflation.

Suggested Citation

  • Francis Breedon, 2012. "A Variance Decomposition of Index-Linked Bond Returns," Working Papers 688, Queen Mary University of London, School of Economics and Finance.
    • Handle: RePEc:qmw:qmwecw:688
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    File URL: https://www.qmul.ac.uk/sef/media/econ/research/workingpapers/2012/items/wp688.pdf
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    References listed on IDEAS

    as
    1. Campbell, John Y & Ammer, John, 1993. "What Moves the Stock and Bond Markets? A Variance Decomposition for Long-Term Asset Returns," Journal of Finance, American Finance Association, vol. 48(1), pages 3-37, March.
    2. Carolin E. Pflueger & Luis M. Viceira, 2011. "Return Predictability in the Treasury Market: Real Rates, Inflation, and Liquidity," NBER Working Papers 16892, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Benlagha, N., 2013. "Co-movement of Index linked bonds and conventional bonds in France: Subprime crisis and Structural Break, 2003-01, 2012-04," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 13(1), pages 55-66.

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    More about this item

    Keywords

    Index-linked bonds; Variance decomposition; Real interest rate;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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