Abstract
The authors ask how mortgages interact with the other fixed-income markets and what these linkages imply about the key drivers of mortgage excess returns. What is the role of mortgages in an actively managed fixed-income portfolio? When should mortgages be overweighted, and how should they be hedged? An analysis of the performance of mortgages since 1989 helps to address these questions. A five-factor model that includes credit spread changes and spread directionality helps explain up to almost 60% of the historical variation in mortgage excess returns and provides some guidance on appropriate hedging techniques.
- © 2000 Pageant Media Ltd
Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600