Conditional volatility of Colombian Governmental fixed income securities as a predictor of short-term returns

According to literature, the long-maturity forward rates have information about the structure of the expected short-term returns. This paper finds that the conditional volatility factor also has information for predicting the term premium in the six-month expected returns with different maturities. That is, including conditional volatility allows capturing a risk factor consistent with the agent’s expectations. A slow mean-reverting process is also found across different maturities, which is the case of the governmental fixed income securities. In fact, the power of forecasting changes from a six-month to a three-year forward period, at six-month steps according to the mean-reverting tendency which also implied that its predictive power improves at longer forecasting horizons. On the other hand, it presents evidence about the Colombian markets crash in May 2006, which generated special conditions that impacted the market’s behavior and the agent’s risk tolerance.

• Autores: Pantoja-Robayo, J. O. (Javier Orlando)
• Tipo de recurso: Article of journal
• Fecha de publicación: 2008
• Institución: Universidad EIA .
• Repositorio: Repositorio EIA .
• Idioma: eng
• OAI Identifier: oai:repository.eia.edu.co:11190/612
• Acceso en línea: https://repository.eia.edu.co/handle/11190/612
• Palabra clave: REI00092; ORGANIZACIÓN E INDUSTRIA; ORGANIZATION AND INDUSTRY; CARTERA DE INVERSIONES; PORTFOLIO ( FINANCE ); CONDITIONAL VOLATILITY; SHORT TERM RETURN STRUCTURE; FORWARD RATES; GARCH MODELS; TERM PREMIUM; GOVERNMENTAL FIXED INCOME SECURITIES; VOLATILIDAD CONDICIONAL; ESTRUCTURA DE RETORNOS DE CORTO PLAZO; TASAS DE INTERÉS FUTURAS; MODELOS GARCH; PRIMA DE RIESGO; TÍTULOS GUBERNAMENTALES DE RENTA FIJA
• Rights: openAccess
• License: Derechos Reservados - Universidad EIA, 2020