No. 688: A Variance Decomposition of Index-Linked Bond Returns
Francis Breedon ,
Queen Mary, University of London
January 1, 2012
We undertake a variance decomposition of index-linked bond returns for the US, UK and Iceland. In all cases, news about future excess returns is the key driver though only for Icelandic bonds are returns independent of inflation.
J.E.L classification codes: E43, G12
Keywords:Index-linked bonds, Variance decomposition, Real interest rate