Short-Term Patterns in Government Bond Returns Following Market Shocks: International Evidence

Posted: 20 Jan 2016

See all articles by Konstantinos Kassimatis

Konstantinos Kassimatis

Athens University of Economics and Business - Department of Business Administration

Spyros I. Spyrou

Athens University of Economics and Business - Department of Accounting and Finance

Emilios C. Galariotis

Audencia Business School ; Audencia Nantes School of Management

Date Written: December 05, 2008

Abstract

The paper employs government bond portfolios from 17 countries so as to investigate the short-run reaction of investors to price shocks. The findings indicate a uniform return reversal pattern across countries, that persists irrespective of various robustness tests such as different data-sets (DataStream/J.P. Morgan), different maturity bands, and day-of-the-week effects. Simulated trading strategies based on our results suggest that this pattern can be employed to generate economically significant profits for many country portfolios. We also demonstrate that significant zero-investment profits are possible even when instead of the expensive to replicate country bond portfolios we employ directly tradable and low transaction cost instruments, such as Bond Futures Contracts.

Keywords: Price shocks, Government bonds, Bond futures

JEL Classification: G14, G15

Suggested Citation

Kassimatis, Konstantinos and Spyrou, Spyros I. and Galariotis, Emilios C., Short-Term Patterns in Government Bond Returns Following Market Shocks: International Evidence (December 05, 2008). International Review of Financial Analysis, Vol. 17, No. 5, 2008, Available at SSRN: https://ssrn.com/abstract=2718899

Konstantinos Kassimatis (Contact Author)

Athens University of Economics and Business - Department of Business Administration ( email )

Athens
Greece

Spyros I. Spyrou

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission Street
GR-104 34 Athens
Greece

Emilios C. Galariotis

Audencia Business School ( email )

8 Road Joneliere
BP 31222
Nantes Cedex 3, 44312
France

HOME PAGE: http://faculte-recherche.audencia.com/en/faculty/faculty-member-cvs/emilios-galariotis/

Audencia Nantes School of Management ( email )

France

HOME PAGE: http://faculte-recherche.audencia.com/en/faculty/faculty-member-cvs/emilios-galariotis/

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