Portal de Periódicos da CAPES

Explorations Into Factors Explaining Money Market Returns

1994; Wiley; Volume: 49; Issue: 5 Linguagem: Inglês

10.2307/2329274

1540-6261

Peter J. Knez, Robert B. Litterman, José Scheinkman,

Stock Market Forecasting Methods

The Journal of FinanceVolume 49, Issue 5 p. 1861-1882 Shorter Paper Explorations Into Factors Explaining Money Market Returns PETER J. KNEZ, PETER J. KNEZSearch for more papers by this authorROBERT LITTERMAN, ROBERT LITTERMANSearch for more papers by this authorJOSÉ SCHEINKMAN, JOSÉ SCHEINKMANKnez is from the University of Wisconsin, Litterman is from Goldman, Sachs & Co., and Scheinkman is from the University of Chicago. The authors would like to thank Fischer Black, Ron Krieger, Steve Lalli, and Robert Stambaugh for their many helpful comments and suggestions and Yvonne Nagel for expert assistance with graphic illustrations.Search for more papers by this author PETER J. KNEZ, PETER J. KNEZSearch for more papers by this authorROBERT LITTERMAN, ROBERT LITTERMANSearch for more papers by this authorJOSÉ SCHEINKMAN, JOSÉ SCHEINKMANKnez is from the University of Wisconsin, Litterman is from Goldman, Sachs & Co., and Scheinkman is from the University of Chicago. The authors would like to thank Fischer Black, Ron Krieger, Steve Lalli, and Robert Stambaugh for their many helpful comments and suggestions and Yvonne Nagel for expert assistance with graphic illustrations.Search for more papers by this author First published: December 1994 https://doi.org/10.1111/j.1540-6261.1994.tb04784.xCitations: 128 Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onEmailFacebookTwitterLinkedInRedditWechat ABSTRACT In this article, we measure and interpret the common "factors" that describe money market returns. Results are presented for both three-and four-factor models. We find that the three-factor model explains, on average, 86 percent of the total variation in most money market returns while the four-factor model explains, on average, 90 percent of this variation. Using mimicking portfolios, we provide an interpretation of the systematic risks represented by these factors. REFERENCES Barlett, Maurice S., 1950, Tests of significance in factor analysis, British Journal of Mathematical and Statistical Psychology 3, 77–85. Brown, Steve, and Paul Dybvig, 1986, The empirical implications of the Cox, Ingersoll, Ross theory of the term structure of interest rates, The Journal of Finance 41, 617–630. Chen, Ren-Raw, and Louis Scott, 1990, Maximum likelihood estimation for a multi-factor equilibrium model of the term structure of interest rates, Mimeo, Georgia Institute of Technology. Connor, Gregory, and Robert A. Korajczyk, 1988, Risk and return in an equilibrium APT: Application of a new test methodology, Journal of Financial Economics 21, 255–289. Cox, John C., Jonathan E. Ingersoll Jr., and Stephen A. Ross, 1985, A theory of the term structure of interest rates, Econometrica 53, 385–407. Fama, Eugene F., 1984, The information in term structure, Journal of Financial Economics 13, 509–528. Fama, Eugene F., 1986, Term premiums and default premiums in money markets, Journal of Financial Economics 17, 175–196. Fama, Eugene F., and James Macbeth, 1973, Risk, return and equilibrium: empirical tests, Journal of Political Economy 81, 607–638. Gibbons, Michael R., and Krishna Ramaswamy, 1993, A test of the Cox, Ingersoll, and Ross model of the term structure, Review of Financial Studies 6, 619–658. Gultekin, N. Bulent, and Richard Rogalski, 1985, Government bond returns measurement of interest rate risk, and the arbitrage pricing theory, The Journal of Finance 40, 43–61. Huberman, Gur, Shmuel Kandel, and Robert F. Stambaugh, 1987, Mimicking portfolios and exact arbitrage pricing, Journal of Financial Economics 42, 1–9. Joreskog, Karl G., 1967, Some contributions to maximum likelihood factor analysis, Psychometrika 32, 443–482. Lehmann, Bruce N., and David M. Modest, 1985, The empirical foundations of the arbitrage pricing theory I: The optimal construction of basis portfolios, Unpublished manuscript, Graduate School of Business, Columbia University. Litterman, Robert, and José Scheinkman, 1988, Common factors affecting bond returns, The Journal of Fixed Income 1, 54–61. Roll, Richard W., and Stephen A Ross, 1980, An empirical investigation of the arbitrage pricing theory, Journal of Financial Economics 35, 1073–1103. Ross, Stephen A., 1976, The arbitrage theory of capital, Journal of Financial Economics 13, 341–360. Stambaugh, Robert F., 1988, The information in forward rates: Implications for models of the term structure, Journal of Financial Economics 21, 41–70. Citing Literature Volume49, Issue5December 1994Pages 1861-1882 ReferencesRelatedInformation