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Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/27076

Title: Coupon Effects and the Pricing of Japanese Government Bonds: An Empirical Analysis
Authors: Eom, Young Ho
Subrahmanyam, Marti G.
Uno, Jun
Keywords: Japanese Government Bond Market
Accounting and Tax Effects
Term Structure
Issue Date: Apr-1998
Series/Report no.: FIN-98-078
Abstract: In many markets, the term structure of interest rates implied by coupon Treasury bonds provides a key input for pricing and hedging interest rate-sensitive securities. Previous studies in the Japanese market, however, suggest that the prices of the Japanese Government Bonds (JGB's) were significantly affected modelling in the Japanese context bases on interest rate factors could leave to misleading results. Since the previous studies, there have been significant structural changes in the regulatory environment, and in the liquidity of the Japanese bond market in the 1990's. In this light, we examine the effect of these changes on the JGB prices during the period between 1990 and 1996, by analyzing the term structure of interest rates in the JGB market over time. Specifically, we use the B-spline method to fit the term structure of interest rates using weekly prices of "non-benchmark" ten-year JGB's. We also use a non-linear econometric model to examine the significance of the "coupon" effects, which are the results of regulatory, accounting and liquidity factors.
URI: http://hdl.handle.net/2451/27076
Appears in Collections:Finance Working Papers

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