Year of Graduation
Analysis of Reinvestment Risk: Evidence from the UK Government Bonds Market
The bond market and its features are quite relevant topics for research in the financial sector. In particular, the issues of studying the term structure of interest rates and horizon premiums have been raised in scientific works since the end of the 19th century. This study examined the risk of reinvestment in regard of the UK government bonds market. The study covered a sample including conventional non-index-linked bond issues between 1997 and 2017. The difference between the value of the coupon bond and the value of the replicating portfolio was used as the proxy for the premium for reinvestment risk. Several financial and macroeconomic indicators were selected as the factors used in the empirical analysis. The results of econometric analysis have shown that different factors influence the premium for reinvestment risk depending on different investment horizons. Also, differences were found in the direction of the influence of the same factor. It should be noted that there is scope for expanding the present study in the form of an increase in the number of observations and the use of more advanced econometric models.