Sharpe and Treynor Ratios on Treasury Bonds
We challenge asset pricing theory with numerous stylized facts regarding risk and return on U.S. Treasury securities. Most striking is our finding that reward/risk ratios vary inversely with maturity and are incredibly high for short‐term bills. Apparently investors would do much better engaging in...
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Veröffentlicht in: | The Journal of business (Chicago, Ill.) Ill.), 2006-01, Vol.79 (1), p.149-180 |
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Hauptverfasser: | , |
Format: | Artikel |
Sprache: | eng |
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Online-Zugang: | Volltext |
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Zusammenfassung: | We challenge asset pricing theory with numerous stylized facts regarding risk and return on U.S. Treasury securities. Most striking is our finding that reward/risk ratios vary inversely with maturity and are incredibly high for short‐term bills. Apparently investors would do much better engaging in highly leveraged investments in bills instead of purchasing long‐maturity bonds or common stocks. Simulations of estimated three‐factor affine term structure models do not replicate the high ratios of reward to risk for bills. Other results include business cycle patterns in risk premiums, volatility, and the reward to volatility that vary with maturity. |
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ISSN: | 0021-9398 1537-5374 |
DOI: | 10.1086/497409 |