Government Bond Yield Volatility and It’s Determinants: The Case of Indonesia Government Bond

MUHARAM, Harjum (2013) Government Bond Yield Volatility and It’s Determinants: The Case of Indonesia Government Bond. The First International Conference on Finance and Banking Faculty of Economics and Business Diponegoro University-IFMA . pp. 1-25.

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Abstract

This research is conducted from gaps of research findings regarding factors influencing government bond yield. The aim of this research is to develop a model of government bond yield determinants and to test hypothesis about the effect of inflation, foreign reserves, local interest rate, stock market return, exchange rate, foreign interest rate, world oil prices, real sector performance, and conditional variances on government bond yield. Time series process and multifactor models are employed. The model combines two approaches called Multifactor EGARCH-M Model. The population is Indonesian government bond, denominating in IDR and has a fixed coupon rate. The sample selected is five years tenor bond. The findings are: (1) Indonesia’s government bond yield has volatility clustering as measured by GARCH process; (2) based on adjusted R2, logL, Akaike Information Criterion (AIC) and Schwarz Criterion (SC), Multifactor EGARCH-M Model is the best model among six models developed; (3) as a proxy of market risk and default risk, GARCH-M has the biggest effect on its yield followed by non gold reserve; (4) the other variables having influences on government bond yields are: local interest rate, stock market return, exchange rate, foreign interest of rate, and world oil price. Inflation and real sector performance have no effect on government bond yields.

Item Type:Article
Additional Information:yield, government bonds, multifactor model, conditional variance, GARCH.
Uncontrolled Keywords:yield, government bonds, multifactor model, conditional variance, GARCH.
Subjects:H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Divisions:Faculty of Economics and Business > Department of Management
ID Code:67545
Deposited By:Mr. Perpustakaan Fakultas Ekonomi
Deposited On:05 Dec 2018 09:23
Last Modified:05 Dec 2018 09:23

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