A Study on Taiwan's Bond Market Integrity and Market Timing Ability - Based on The Armax-Garch Model

Abstract

Due to the market’s integrity and lack of liquidity of Taiwan’s bond market, a bond manager finds it difficult to flexibly adjust portfolio allocation and systemic risk. No matter in the T-M model, T-M ARMAX-GARCH model, or H-M ARMAX-GARCH model, this study’s results show that most bond funds do not have selective ability and significant systemic risk and timing ability, except for the H-M model. Hence, we recommend that Taiwan’s bond market should develop more investment products, improve liquidity in the market, and enlarge the operating space of the fund manager.