Sharpe and treynor ratios on treasury bonds

Eugene A. Pilotte, Frederic P. Sterbenz

Research output: Contribution to journalArticlepeer-review

25 Scopus citations


We challenge asset pricing theory with numerous stylized facts regarding risk and return on U.S. Treasury securities. Most striking is our finding that reward/risk ratios vary inversely with maturity and are incredibly high for short-term bills. Apparently investors would do much better engaging in highly leveraged investments in bills instead of purchasing long-maturity bonds or common stocks. Simulations of estimated three-factor affine term structure models do not replicate the high ratios of reward to risk for bills. Other results include business cycle patterns in risk premiums, volatility, and the reward to volatility that vary with maturity.

Original languageEnglish (US)
Pages (from-to)149-180
Number of pages32
JournalJournal of Business
Issue number1
StatePublished - Jan 2006

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty


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