Pricing Effects in Fannie Mae Agency Bonds

J. OF REAL ESTATE FINANCE AND ECONOMICS, Vol. 11 No. 3, November 1995

Posted: 2 Jul 1998

See all articles by Brent W. Ambrose

Brent W. Ambrose

Pennsylvania State University

Arthur Warga

University of Houston - Department of Finance

Abstract

As a government sponsored enterprise, Fannie Mae enjoys certain advantages over other firms. The extent of these advantages, while widely discussed, have not yet been fully quantified. This paper empirically examines the returns to Fannie Mae general obligation bonds under the assumptions of the Arbitrage Pricing Theory. The model provides an explicit method for estimating the risk premium on Fannie Mae bonds. The results indicate the liquidity and tax effects are important in explaining the returns to Fannie Mae bonds. The results also indicate that the market does not incorporate changes in the riskiness of the mortgage market into the returns on Fannie Mae bonds. The results provide support for the contention that Fannie Mae, as a government sponsored enterprise, enjoys a significant advantage over other firms in the capital market.

JEL Classification: R0

Suggested Citation

Ambrose, Brent W. and Warga, Arthur, Pricing Effects in Fannie Mae Agency Bonds. J. OF REAL ESTATE FINANCE AND ECONOMICS, Vol. 11 No. 3, November 1995. Available at SSRN: https://ssrn.com/abstract=7293

Brent W. Ambrose (Contact Author)

Pennsylvania State University ( email )

University Park, PA 16802-3306
United States
814-867-0066 (Phone)
814-865-6284 (Fax)

Arthur Warga

University of Houston - Department of Finance ( email )

Houston, TX 77204
United States
713-743-4779 (Phone)
713-743-4789 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
1,158
PlumX Metrics