Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7360675 | Journal of Empirical Finance | 2016 | 31 Pages |
Abstract
A general class of dynamic factor models is used to obtain optimal bond portfolios, and to develop a duration-constrained mean-variance optimization, which can be used to improve bond indexing. An empirical application involving two large data sets of U.S. Treasuries shows that the proposed portfolio policy outperforms a set of yield curve strategies used in bond desks. Additionally, we propose a dynamic rule to switch among alternative bond investment strategies, and find that the benefits of such dynamic rule are even more pronounced when the set of available policies is augmented with the proposed mean-variance portfolios.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
João F. Caldeira, Guilherme V. Moura, André A.P. Santos,