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dc.contributor.authorWagenvoort, Rienen_US
dc.contributor.authorZwart, Sanneen_US
dc.date.accessioned2011-04-19en_US
dc.date.accessioned2011-04-29T08:06:23Z-
dc.date.available2011-04-29T08:06:23Z-
dc.date.issued2010en_US
dc.identifier.urihttp://hdl.handle.net/10419/45285-
dc.description.abstractWe introduce Longitudinal Factor Analysis (LFA) to extract the Common Risk Free (CRF) rate from a sample of sovereign bonds of countries in a monetary union. Since LFA exploits the typically very large longitudinal dimension of bond data, it performs better than traditional factor analysis methods that rely on the much smaller cross-sectional dimension. European sovereign bond yields for the period 2006-2010 are decomposed into a CRF rate, a default risk premium, and a liquidity risk premium, shedding new light on issues such as benchmark status, flight-to-quality and flight-to-liquidity hypotheses. Our empirical findings suggest that investors chase both credit quality and liquidity, and that liquidity is more valued when aggregate risk is high.en_US
dc.language.isoengen_US
dc.publisherEuropean Investment Bank Luxembourgen_US
dc.relation.ispartofseriesEconomic and financial reports / European Investment Bank 2010/05en_US
dc.subject.jelC19en_US
dc.subject.jelE43en_US
dc.subject.jelG12en_US
dc.subject.ddc330en_US
dc.subject.keywordfactor analysisen_US
dc.subject.keywordrisk free interest rateen_US
dc.subject.keywordsovereign bonden_US
dc.subject.keywordbenchmarken_US
dc.titleUncovering the common risk free rate in the European Monetary Unionen_US
dc.typeWorking Paperen_US
dc.identifier.ppn656656735en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:Economic and Financial Reports, European Investment Bank (EIB)

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