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This study examines the risk factors in Australian bond returns. The study quantifies bond liquidity and estimates a liquidity risk factor in the Australian setting. We develop a three-factor asset pricing framework that uses term, default and liquidity risk factors to explain the variation of Australian bond returns. Our findings corroborate the US evidence on the pervasiveness of these risk factors faced by bond investors. The three-factor model developed in this study has practical applications when calculating the cost of debt, evaluating the performance of an active bond fund manager and hedging underlying risk in a bond portfolio. [ABSTRACT FROM AUTHOR] more...

This baseline study examines the retirement adequacy of indigenous Australians. Using indigenous Australian demographic and employment data, we construct a forty years retirement savings profile. We employ simulation techniques to estimate the superannuation balance of a 'typical' indigenous worker. The findings reveal that the retirement outcomes of indigenous workers are approximately 27 per cent lower than the average non-indigenous worker. We also provide baseline estimates of the gender gap in retirement outcomes for indigenous workers. We concede that improving indigenous lifetime outcomes is a significant public policy issue; one that requires many more policy levers than those available to financial economists. [ABSTRACT FROM AUTHOR] more...

This paper considers the accuracy (or otherwise) of cost of equity estimates provided by a range of Australian asset pricing models on industry returns. The results suggest that a simple, constant-benchmark approach (fixed excess return of five percent per annum) provides the best forecast for the cost of equity capital for the various industry segments of the Australian Securities Exchange examined across the observation window. Our results from Australia corroborate U.S. findings regarding the disconnect between asset pricing models that provide the best ex-post explanation of asset returns and models that produce superior ex-ante predictions of the cost of capital. [ABSTRACT FROM AUTHOR] more...