The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Explorations Into Factors Explaining Money Market Returns
Published: 12/01/1994 | DOI: 10.1111/j.1540-6261.1994.tb04784.x
PETER J. KNEZ, ROBERT LITTERMAN, JOSÉ SCHEINKMAN
In this article, we measure and interpret the common “factors” that describe money market returns. Results are presented for both three‐and four‐factor models. We find that the three‐factor model explains, on average, 86 percent of the total variation in most money market returns while the four‐factor model explains, on average, 90 percent of this variation. Using mimicking portfolios, we provide an interpretation of the systematic risks represented by these factors.