Dewachter, Hans; Iania, Leonardo; Lyrio, Marco - Nationale Bank van België/Banque national de Belqique (BNB) - 2014
We use a macro-finance model, incorporating macroeconomic and financial factors, to study the term premium in the U ….S. bond market. Estimating the model using Bayesian techniques, we find that a single factor explains most of the variation in … bond risk premiums. Furthermore, the model-implied risk premiums account for up to 40% of the variability of one- and two …