Better Bond Indices

 

 

Topic: Better Bond Indices

 

Speaker: Matthew Spiegel, Yale School of Management

 

Abstract: Security indices have become a valuable investment and research tool. They allow academics to test whether a particular portfolio strategy or portfolio manager can outperform the market. Bonds, however, trade very infrequently: many trade less than once a month. A bond index therefore cannot rely on real time prices and must instead estimate the value of the market portfolio. Commercial firms do this using proprietary algorithms. We propose using a repeat sales model. Our tests indicate that the resulting indices contain information about market values not available from the commercial indices alone. Furthermore, we present evidence that the repeat sales do a better job of tracking the market basket’s actual return. Tests based on trading strategies show that buying and selling securities under the assumption that the commercial indices will ultimately “catch up” to the repeat sales indices produce consistent profits. This is true whether the strategies use individual bonds, the indices themselves or mutual funds.

 

A light lunch will be provided at 1p.m. Please RSVP for catering purposes to Mala Kapahi by 12 noon on Thursday,19th October.

 

Time: 12.00 – 1.00 p.m.

Venue: University of Technology, Sydney

            Building 8, Level 4, Room 002
            Dr Chau Chak Wing Building

            14 - 28 Ultimo Road, Ultimo

 

 

Enquiries: Mala Kapahi (Ph: +61 2 9514 7777)