Two-factor model for bond selection

Zhenmin FANG, Chi Keung WOO

Research output: Contribution to journalArticlespeer-review


Implementing Markowitz's generalized model of optimal portfolio selection using a factor model is a practical alternative to the calculation of the full variance-covariance matrix of security returns. This note investigates whether the efficient frontier of bond returns is sensitive to how a two-factor model is estimated. An analysis of 19 bond categories with different maturities indicates that the efficient fromtiers obtained are sensitive to the choice of estimation method. Copyright © 1991 Published by Elsevier B.V.

Original languageEnglish
Pages (from-to)417-421
JournalEconomics Letters
Issue number4
Publication statusPublished - Dec 1991


Fang, Z., & Woo, C.-K. (1991). Two-factor model for bond selection. Economics Letters, 37(4), 417-421. doi: 10.1016/0165-1765(91)90080-5


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