TY - JOUR T1 - Risk and Return in the Mortgage Market JF - The Journal of Fixed Income SP - 5 LP - 18 DO - 10.3905/jfi.2000.319235 VL - 10 IS - 1 AU - Amitabh Arora AU - David K. Heike AU - Ravi K. Mattu Y1 - 2000/06/30 UR - https://pm-research.com/content/10/1/5.abstract N2 - 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. ER -