Limits to arbitrage, investor sentiment, and factor returns in international government bond markets

Adam Zaremba , Jan Jakub Szczygielski

Abstract

The perspective of behavioural finance is that anomalies in the cross-section of returns are driven by mispricing that arises from investor irrationality that cannot be easily arbitraged away. In this study, we examine the implications of this for international government bond markets. Using data for 25 countries for the years 1992–2015, we replicate multiple factor strategies that represent four major return drivers: defensive (low-risk), carry, value and momentum. We investigate the relationships between the performance of these strategies and market-wide measures of limits to arbitrage and investor sentiment. We find that the defensive strategy performs best during tight arbitrage conditions whereas severe limits to arbitrage negatively affect momentum profits.
Author Adam Zaremba (WZ / KIiRK)
Adam Zaremba,,
- Department of Investment and Capital Markets
, Jan Jakub Szczygielski - University of Pretoria, Pretoria, South Africa
Jan Jakub Szczygielski ,,
-
Journal seriesEkonomska Istrazivanja-Economic Research, ISSN 1331-677X, e-ISSN 1848-9664, (N/A 70 pkt)
Issue year2019
Vol32
No1
Pages1727-1743
Publication size in sheets0.8
Keywords in Polishrynki międzynarodowe, obligacje skarbowe, anomalie rynku kapitałowego, ograniczenia arbitrażu, nastroje inwestorów, prognozowanie stóp zwrotu
Keywords in Englishinternational markets, government bonds, anomalies, limits to arbitrage, investor sentiment, return predictability
ASJC Classification2002 Economics and Econometrics
DOIDOI:10.1080/1331677X.2019.1638286
URL https://www.tandfonline.com/doi/full/10.1080/1331677X.2019.1638286
Languageen angielski
Score (nominal)70
Score sourcejournalList
ScoreMinisterial score = 70.0, 07-04-2020, ArticleFromJournal
Publication indicators WoS Citations = 0; Scopus SNIP (Source Normalised Impact per Paper): 2018 = 0.775; WoS Impact Factor: 2017 = 1.137 (2) - 2017=0.839 (5)
Citation count*1 (2020-06-25)
Cite
Share Share

Get link to the record


* presented citation count is obtained through Internet information analysis and it is close to the number calculated by the Publish or Perish system.
Back
Confirmation
Are you sure?