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THE G-7 GOVERNMENT BOND MARKETS: A COINTEGRATION STUDY

Fridström, William LU (2022) NEKN01 20221
Department of Economics
Abstract
This thesis examines the long-run relationship among government bond total return indexes for the G-7 nations using weekly observations from 1993 to 2022. Using cointegration and error correction models, this study finds long-run relationships for the G-7 government bond markets as a group and evidence for pairwise cointegration between the US government bond market and many of the other G-7 government bond markets. The results imply that diversification benefits by investing across these markets are limited, with hedged US investors having more opportunities than non-hedged investors. Evidence for short-term arbitrage opportunities was also found for the hedged US investor investing in the French and Italian markets. Weak evidence for... (More)
This thesis examines the long-run relationship among government bond total return indexes for the G-7 nations using weekly observations from 1993 to 2022. Using cointegration and error correction models, this study finds long-run relationships for the G-7 government bond markets as a group and evidence for pairwise cointegration between the US government bond market and many of the other G-7 government bond markets. The results imply that diversification benefits by investing across these markets are limited, with hedged US investors having more opportunities than non-hedged investors. Evidence for short-term arbitrage opportunities was also found for the hedged US investor investing in the French and Italian markets. Weak evidence for progressive cointegration between the G-7 government bond markets was also discovered using a backward recursive cointegration test. (Less)
Please use this url to cite or link to this publication:
author
Fridström, William LU
supervisor
organization
course
NEKN01 20221
year
type
H1 - Master's Degree (One Year)
subject
keywords
Cointegration, VECM, Goverment bond market, G-7, Market Integration
language
English
id
9084338
date added to LUP
2022-10-10 09:21:51
date last changed
2022-10-10 09:21:51
@misc{9084338,
  abstract     = {{This thesis examines the long-run relationship among government bond total return indexes for the G-7 nations using weekly observations from 1993 to 2022. Using cointegration and error correction models, this study finds long-run relationships for the G-7 government bond markets as a group and evidence for pairwise cointegration between the US government bond market and many of the other G-7 government bond markets. The results imply that diversification benefits by investing across these markets are limited, with hedged US investors having more opportunities than non-hedged investors. Evidence for short-term arbitrage opportunities was also found for the hedged US investor investing in the French and Italian markets. Weak evidence for progressive cointegration between the G-7 government bond markets was also discovered using a backward recursive cointegration test.}},
  author       = {{Fridström, William}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{THE G-7 GOVERNMENT BOND MARKETS: A COINTEGRATION STUDY}},
  year         = {{2022}},
}