Two-factor model for bond selection

Zhenmin Fang, Chi-Keung WOO

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

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 languageEnglish
Pages (from-to)417-421
Number of pages5
JournalEconomics Letters
Volume37
Issue number4
DOIs
Publication statusPublished - Dec 1991

Scopus Subject Areas

  • Finance
  • Economics and Econometrics

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