Risk Attitudes of Bond Investors

40 Pages Posted: 5 May 2001

See all articles by B. Philipp Kellerhals

B. Philipp Kellerhals

University of Tuebingen - Department of Business Administration; Deutscher Investment-Trust

Rainer Schoebel

University of Tuebingen - Faculty of Economics and Social Sciences

Date Written: January 2001

Abstract

According to financial theory every security market has its typical risk and return characteristics. Tastes of investors are modeled by reasonable utility functions which directly correspond to the market price of risk in equilibrium. In this paper we measure the risk attitudes of bond investors which can be revealed from settled market prices. We present an equilibrium model which focuses on the stochastic behavior of tastes in addition to the dynamics of investor beliefs. From US Treasury Securities market data we extract the investors' behavior for the period of 1970 to 1998. The results indicate that investors' risk aversion declines with the level of interest rates.

Keywords: Risk attitudes, bond market, equilibrium pricing, tastes and beliefs, stochastic price behavior, Kalman filtering.

JEL Classification: G12, G13, D52

Suggested Citation

Kellerhals, B. Philipp and Schoebel, Rainer, Risk Attitudes of Bond Investors (January 2001). EFMA 2001 Lugano Meetings. Available at SSRN: https://ssrn.com/abstract=269048 or http://dx.doi.org/10.2139/ssrn.269048

B. Philipp Kellerhals

University of Tuebingen - Department of Business Administration ( email )

Mohlstrasse 36
Tuebingen, D-72074
Germany
+49-7071-2977088 (Phone)
+49-7071-550622 (Fax)

Deutscher Investment-Trust ( email )

Portfolio Management Quantitative Products
Mainzer Landstrasse 11-13
60329 Frankfurt am Main
Germany
+49 (0) 69 263 15359 (Phone)
+49 (0) 69 263 14947 (Fax)

Rainer Schoebel (Contact Author)

University of Tuebingen - Faculty of Economics and Social Sciences ( email )

Mohlstrasse 36
D-72074 Tuebingen
Germany
+49 7071 2977088 (Phone)

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