"This paper considers a variety of econometric models for the joint distribution of US stock and bond returns in the … presence of regime switching dynamics. While simple two- or three-state models capture the univariate dynamics in bond and …

two economies: in one, agents can sell government bonds (outside bonds) and in the other they can borrow (issue inside … bonds). All transactions are voluntary, implying no taxation or forced redemption of private debt. We show that any … allocation in the economy with inside bonds can be replicated in the economy with outside bonds but that the converse is not true …

This paper investigates the source of predictability of bond risk premia by means of long-term forward interest rates … bond prices. We show that the predictive ability of forward rates could be due to the high serial correlation and cross …-correlation of bond prices. After a simple reparametrization of models used to predict spot rates or excess returns, we find that …