Ilmanen is a vice president at Salomon Brothers, New York. This article is based on my dissertation in the Graduate School of Business at the University of Chicago. I would particularly like to thank my dissertation committee chairmen Eugene Fama and Kenneth French for helpful discussions. I also thank John Cochrane, George Constantinides, Wayne Ferson, Robin Grieves, Campbell Harvey, Doug Huggins, John Huizinga, Johnny Liew, Anthony Lynch, Guillermo Mondino, Rudi Schadt, Boaz Schwartz, René Stulz (the editor), Ingrid Tierens, and an anonymous referee for their comments. I am grateful to the Bank of Finland and Salomon Brothers for providing various data series.
Time-Varying Expected Returns in International Bond Markets
Article first published online: 30 APR 2012
1995 The American Finance Association
The Journal of Finance
Volume 50, Issue 2, pages 481–506, June 1995
How to Cite
ILMANEN, A. (1995), Time-Varying Expected Returns in International Bond Markets. The Journal of Finance, 50: 481–506. doi: 10.1111/j.1540-6261.1995.tb04792.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
This article examines the predictable variation in long-maturity government bond returns in six countries. A small set of global instruments can forecast 4 to 12 percent of monthly variation in excess bond returns. The predictable variation is statistically and economically significant. Moreover, expected excess bond returns are highly correlated across countries. A model with one global risk factor and constant conditional betas can explain international bond return predictability if the risk factor is proxied by the world excess bond return, but not if it is proxied by the world excess stock return.