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Board of Governors of the Federal Reserve System (U.S.)
International Finance Discussion Papers
Excess returns and risk at the long end of the Treasury market: an EGARCH-M approach
Allan D. Brunner
David P. Simon
Abstract

This paper models weekly excess returns of 10-year Treasury notes and long-term Treasury bonds from 1968 through 1993 using an exponential generalized autoregressive conditional hetroskedasticity in mean (EGARCH-M) approach. The results indicate the presence of conditional hetroskedasticity and a strong tendency for the ex-ante volatility of excess returns to increase more following negative excess return innovations compared to positive innovations of equal magnitude. In addition, increases in ex-ante volatility are associated in some subperiods with rising excess returns on longer-term instruments, although the slope of the yield curve and lagged excess returns generally remain significant predictors of excess returns.


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Allan D. Brunner & David P. Simon, Excess returns and risk at the long end of the Treasury market: an EGARCH-M approach, Board of Governors of the Federal Reserve System (U.S.), International Finance Discussion Papers 522, 1995.
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Keywords: Treasury bills
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