1992 Fiscal Year Final Research Report Summary

A study of pricing in the government bonds markets in Japan

Research Project

Project/Area Number	03630058
Research Category	Grant-in-Aid for General Scientific Research (C)
Allocation Type	Single-year Grants
Research Field	Public finance/Monetary economics
Research Institution	Hitotsubashi Univ.
Principal Investigator	KAMAE Hiroshi Hitotsubashi Univ. Commerce, Professor, 商学部, 教授 (60091542)
Project Period (FY)	1991 – 1992
Keywords	term structure of interest rate / pure expectations hypothesis / spot rate / unbiasedness condition / premia / GARCH-M
Research Abstract	1. In this research, I have analyzed structure of the government bonds markets, especially those of the long-term bonds in Japan, by studying the term structure of the interest rates. I have tested whether the pure expectations hypothesis holds or not after the futures market of the government bonds have started. I have specified that hypothesis in terms of discount bonds, and estimated it by using data of the spot rates and the corrected OLS method. When I have assumed that the expected value of all of the issues have unbiasedness property, then the estimation results rejected the hypothesis about almost all terms to maturity. 2. The results shown above suggests that existence of term premia. In the second stage of my research, I estimated ARCH-M and GARCH-M models in order to look for the premia of holding period yields. The estimation results shows constant premia can be found in some cases of almost terms to maturity and time-varying ones are found in cases of the greater part of terms to maturity.