Common Factors in International Bond Returns and a Joint ATSM to Match Them

The existence of common factors in international bond markets is an important cause for modelling different term structures of interest rates jointly. This paper investigates the common factors of US and UK treasury yields in the period of 1983 to 2012. A principal component analysis motivates the type of joint ATSM for modelling the yield curves of two distinct economies. In sum, two common factors explain 85% of the yield variation and the model factors have a solid economic intuition.

• Publication year

  2014

• Venue

  Theoretical Economics Letters

• Publication date

  2014-07-29

• Fields of study

  Economics

• Identifiers
  DOI 10.4236/TEL.2014.47067
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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