Risk and Return in the TIPS Market

Authors

  • Winfield P. Betty Department of Finance, College of Business Administration, The University of Texas at San Antonio
  • Karan Bhanot Department of Finance, College of Business Administration, The University of Texas at San Antonio

DOI:

https://doi.org/10.61190/fsr.v11i2.4731

Abstract

In this article, the risk and return characteristics of Treasury Inflation Protected Securities (TIPS) are empirically examined and compared to those of a series of investments in Treasury Bills. Using secondary market prices for the period January 1997 to May 2001 on TIPS issued in the United States, we show that TIPS offer a marginally higher average return but a much higher volatility of returns than a series of Treasury Bills, for various investment horizons. We argue that the observed risk/return qualities are introduced by the variability of real rates and the taxation of inflation adjustments made to TIPS.

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Published

2002-06-30

How to Cite

Betty, W. P., & Bhanot, K. (2002). Risk and Return in the TIPS Market. Financial Services Review, 11(2), 189–199. https://doi.org/10.61190/fsr.v11i2.4731

Issue

Vol. 11 No. 2 (2002): FSR Summer 2002

Section

New Original Submission

License

Copyright (c) 2002 Academy of Financial Services

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