Social Sharing
Extended Viewer
Risk and Return in the Canadian Bond Market
Jan 1, 1993
We will present in this article a specific multifactor risk model of the Canadian bond market that we developed at Barra. First, we will describe the particular features of the Canadian bond market. Second, we will present a valuation model of the Canadian Government bond market that will identify and measure the various sources of risk, including the term structure and tax and liquidity factors. Third, we will describe the analysis of the historical variance and covariance of excess returns(4) to these factors, which will lead us to the risk model. Fourth, we will present quantitative results pertaining to the market. An article in the next issue of the Barra Newsletter will focus on the valuation and risk models of the Provincial and Corporate sectors of the Canadian bond market.