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The role of time-varying rare disaster risks in predicting bond returns and volatility
journal contributionposted on 2019-03-15, 10:53 authored by Rangan Gupta, Tahir Suleman, Mark Wohar
This paper aims to provide empirical evidence to the theoretical claim that rare disaster risks affect government bond market movements. Using a nonparametric quantiles-based methodology, we show that rare disaster-risks affect only volatility, but not returns, of 10-year government bond of the United States over the monthly period of 1918:01 to 2013:12. In addition, the predictability of volatility holds for the majority of the conditional distribution of the volatility, with the exception of the extreme ends. Moreover, in general, similar results are also obtained for long-term government bonds of an alternative developed country (UK) and an emerging market (South Africa).
- Business and Economics
Published inReview of Financial Economics
CitationGUPTA, R., SULEMAN, T. and WOHAR, M.E., 2018. The role of time-varying rare disaster risks in predicting bond returns and volatility. Review of Financial Economics, 37(3), pp.327-340.
PublisherWiley © The University of New Orleans
- AM (Accepted Manuscript)
Publisher statementThis is the peer reviewed version of the following article: GUPTA, R., SULEMAN, T. and WOHAR, M.E., 2018. The role of time-varying rare disaster risks in predicting bond returns and volatility. Review of Financial Economics, 37(3), pp.327-340, which has been published in final form at https://doi.org/10.1002/rfe.1051. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions