Two-factor model for bond selection

Zhenmin Fang; Chi-Keung WOO

doi:10.1016/0165-1765(91)90080-5

Two-factor model for bond selection

Zhenmin Fang, Chi-Keung WOO

Research output: Contribution to journal › Article › peer-review

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Abstract

Implementing Markowitz's generalized model of optimal portfolio selection using a factor model is a practical alternative to the calculation of the full variance-covariance matrix of security returns. This note investigates whether the efficient frontier of bond returns is sensitive to how a two-factor model is estimated. An analysis of 19 bond categories with different maturities indicates that the efficient fromtiers obtained are sensitive to the choice of estimation method.

Original language	English
Pages (from-to)	417-421
Number of pages	5
Journal	Economics Letters
Volume	37
Issue number	4
DOIs	https://doi.org/10.1016/0165-1765(91)90080-5
Publication status	Published - Dec 1991

Scopus Subject Areas

Finance
Economics and Econometrics

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10.1016/0165-1765(91)90080-5

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title = "Two-factor model for bond selection",

abstract = "Implementing Markowitz's generalized model of optimal portfolio selection using a factor model is a practical alternative to the calculation of the full variance-covariance matrix of security returns. This note investigates whether the efficient frontier of bond returns is sensitive to how a two-factor model is estimated. An analysis of 19 bond categories with different maturities indicates that the efficient fromtiers obtained are sensitive to the choice of estimation method.",

author = "Zhenmin Fang and Chi-Keung WOO",

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AB - Implementing Markowitz's generalized model of optimal portfolio selection using a factor model is a practical alternative to the calculation of the full variance-covariance matrix of security returns. This note investigates whether the efficient frontier of bond returns is sensitive to how a two-factor model is estimated. An analysis of 19 bond categories with different maturities indicates that the efficient fromtiers obtained are sensitive to the choice of estimation method.

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JO - Economics Letters

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Two-factor model for bond selection

Abstract

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