The Taper Tantrum of 2013: Momentum-Driven or a Return to Fundamentals?

Author

Colette L. Terhune, University of Arkansas, FayettevilleFollow

Date of Graduation

5-2016

Document Type

Thesis

Degree Name

Bachelor of Science in Business Administration

Degree Level

Undergraduate

Department

Finance

Advisor/Mentor

Yeager, Timothy J.

Committee Member/Reader

Hsu, Scott

Abstract

This study explores the driving force behind the Taper Tantrum of 2013. Following the Fed’s announcements of potential QE tapering, investors poured of the bond market, causing yields to rise sharply. This analysis seeks to determine whether this was a momentum-driven reaction or a return to fundamental values. Throughout this paper, fundamental determinants of bond prices and investor returns are combined with trading volume and bid-ask spread data to determine the motivating market force. The findings suggest that the Taper Tantrum was a return to fundamental bond prices following an asset bubble burst, likely due to momentum trading.

Citation

Terhune, C. L. (2016). The Taper Tantrum of 2013: Momentum-Driven or a Return to Fundamentals?. Finance Undergraduate Honors Theses Retrieved from https://scholarworks.uark.edu/finnuht/26