EXAMINATION OF BOND RISK PREMIA FROM THE BANKING PERSPECTIVE

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Selim Orhan_Thesis_07.06.2022.pdf

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2022-5-10

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Orhan, Selim

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Banks are considered as the marginal and sophisticated investors of financial markets. This is evident in the Haddad and Sraer (2020) study that examines the US government bond excess returns. This study extends the Haddad/Sraer analysis to the Turkish government bond market. According to the forecasting results, exposure ratio provides explanatory power over bond excess returns, especially for longer maturities. On the other hand, output gap and industrial growth present strong in-sample forecasting power for shorter-term maturities. The inclusion of macroeconomic variables into the regression along with exposure ratio increases the significance and explanatory power of exposure ratio for the explanation of bond excess returns. Output gap is the most contributive in-sample forecasting macro variable in terms of the explanation of bond excess returns. Together with output gap and exposure ratio, the inclusion of consumer price index (CPI), producer price index (PPI) or consumer confidence index improves the statistical and economic significance of in-sample regression results.

Subject Keywords

Bond Risk Premia, Bond Excess Return, Exposure Ratio, Income Gap, Government Bond Market, Yield, Government Bond Market, Yield Curve

URI

https://hdl.handle.net/11511/97355

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Graduate School of Applied Mathematics, Thesis

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Citation Formats

S. Orhan, “EXAMINATION OF BOND RISK PREMIA FROM THE BANKING PERSPECTIVE,” M.S. - Master of Science, Middle East Technical University, 2022.