RT Journal Article
SR Electronic
T1 Fixed Income Index Fund Cash Flows, Yields, and Returns in Dynamic Yield Environments
JF The Journal of Index Investing
FD Institutional Investor Journals
SP 67
OP 83
DO 10.3905/jii.2018.1.059
VO 9
IS 1
A1 Stephen A. Laipply
A1 Matthew Tucker
YR 2018
UL https://pm-research.com/content/9/1/67.abstract
AB This article seeks to explain the relationship between the yields, cash flows, and total returns of fixed income index portfolios (mutual funds or ETFs) as observable duration-targeted bond portfolios. It builds on prior work by Leibowitz et al., but extends that work to include the impacts of positively and negatively sloped yield curves and fund minimum maturity rules.A framework is developed to explain the evolution of fund net asset values over time through changes in portfolio coupon levels, average bond prices and face amount outstanding across varying yield environments. This framework is then applied to specific case studies of fixed income ETFs and bond indexes to develop a more complete attribution of portfolio total returns over time.TOPICS: Fixed income and structured finance, exchange-traded funds and applications