My Finance

Smaila Amoanu helpfully scanned annual (total, nominal) long-term government and corporate bond returns 1926-2015.

I augmented the corporate bond returns by adding 1976-2025 Novel Investor data. The previous model still holds, although without volatility! with unfortunately very low .

But are Gaussian IID, judging by the Ljung-Box test for 5 and 10 lags for and and by the Shapiro-Wilk and Jarque-Bera tests. The code is available here.

Also, we can analyze long-term government returns. The regression of 1926-2015 similar to the above produces duration slightly less than 9 and but with residuals which are NOT Gaussian IID. Division by volatility does not improve the fit. See the GitHub repository. But we simply switch to deterministic generation of returns of Treasuries but with 10-year maturities. Or maybe with 9-year, since we had duration around 9 in the above regression?

Also, in the new data file in the new repository https://github.com/asarantsev/Bayes9 we extended BAA and Long rates data from 1927 to 1925, two additional years. And we rewrote regressions to fit it.