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Unspanned macroeconomic factors in the yield curve

Coroneo, Laura; Giannone, Domenico; Modugno, Michele - Federal Reserve Board (Board of Governors of the … - 2014

In this paper, we extract common factors from a cross-section of U.S. macro-variables and Treasury zero-coupon yields. We find that two macroeconomic factors have an important predictive content for government bond yields and excess returns. These factors are not spanned by the cross-section of...

Persistent link: https://www.econbiz.de/10010886225

Consumers' Attitudes and Their Inflation Expectations

Ehrmann, Michael; Pfajfar, Damjan; Santoro, Emilianio - Federal Reserve Board (Board of Governors of the … - 2015

This paper studies consumers' inflation expectations using micro-level data from the Surveys of Consumers conducted by University of Michigan. It shows that beyond the well-established socio-economic factors such as income, age or gender, other characteristics such as the households' financial...

Persistent link: https://www.econbiz.de/10011261278

The Importance of Updating: Evidence from a Brazilian Nowcasting Model

Bragoli, Daniela; Metelli, Luca; Modugno, Michele - Federal Reserve Board (Board of Governors of the … - 2014

How often should we update predictions for economic activity? Gross domestic product is a quarterly variable disseminated usually a couple of months after the end of the quarter, but many other macroeconomic indicators are released with a higher frequency, and financial markets react very...

Persistent link: https://www.econbiz.de/10011075127

A Tale of Two Option Markets: Pricing Kernels and Volatility Risk

Song, Zhaogang; Xiu, Dacheng - Federal Reserve Board (Board of Governors of the … - 2014

volatility risk. While pointing out the joint pricing kernel is not identified nonparametrically, we propose model-free estimates … of marginal pricing kernels of the market return and volatility conditional on the VIX. We find that the pricing kernel … present a U-shape. Hence, stochastic volatility is the key state variable responsible for the U-shape puzzle documented in the …

Persistent link: https://www.econbiz.de/10010886219

QE Auctions of Treasury Bonds

Song, Zhaogang; Zhu, Haoxiang - Federal Reserve Board (Board of Governors of the … - 2014

The Federal Reserve (Fed) uses a unique auction mechanism to purchase U.S. Treasury securities in implementing its quantitative easing (QE) policy. In this paper, we study the outcomes of QE auctions and participating dealers' bidding behaviors from November 2010 to September 2011, during which...

Persistent link: https://www.econbiz.de/10010886228

Solving asset pricing models with stochastic volatility

de Groot, Oliver - Federal Reserve Board (Board of Governors of the … - 2014

stochastic volatility. The solution is useful in allowing comparisons among numerical methods used to approximate the non …

Persistent link: https://www.econbiz.de/10010937975

Bayesian Estimation of Time-Changed Default Intensity Models

Gordy, Michael B.; Szerszen, Pawel J. - Federal Reserve Board (Board of Governors of the … - 2015

We estimate a reduced-form model of credit risk that incorporates stochastic volatility in default intensity via …-dependent volatility in the state equation. We implement on firm-level time-series of CDS spreads, and find strong in-sample evidence of … stochastic volatility in this market. Relative to the widely-used CIR model for the default intensity, we find that stochastic …

Persistent link: https://www.econbiz.de/10011273702

Credit-Market Sentiment and the Business Cycle

Lopez-Salido, J. David; Stein, Jeremy C.; Zakrajsek, Egon - Federal Reserve Board (Board of Governors of the … - 2015

Using U.S. data from 1929 to 2013, we show that elevated credit-market sentiment in year t-2 is associated with a decline in economic activity in years t through t+2. Underlying this result is the existence of predictable mean reversion in credit-market conditions. That is, when our sentiment...

Persistent link: https://www.econbiz.de/10011273704

Institutions and return predictability in oil-exporting countries

Aramonte, Sirio; Jahan-Parvar, Mohammad; Shugarman, Justin - Federal Reserve Board (Board of Governors of the … - 2015

We study whether stock market returns in oil-exporting countries can be predicted by oil price changes, and we investigate the link between predictability and the quality of each country's institutions. Returns are predictable for half the countries we consider, and predictability is stronger...

Persistent link: https://www.econbiz.de/10011255347

Downside Variance Risk Premium

Feunou, Bruno; Jahan-Parvar, Mohammad; Okou, Cedric - Federal Reserve Board (Board of Governors of the … - 2015

We propose a new decomposition of the variance risk premium in terms of upside and downside variance risk premia. The difference between upside and downside variance risk premia is a measure of skewness risk premium. We establish that the downside variance risk premium is the main component of...

Persistent link: https://www.econbiz.de/10011261280