Cochrane, John H.; Piazzesi, Monika - National Bureau of Economic Research (NBER) - 2002
This paper studies time variation in expected excess bond returns. We run regressions of annual excess returns on forward rates. We find that a single factor predicts 1-year excess returns on 1-5 year maturity bonds with an R2 up to 43%. The single factor is a tent-shaped linear function of...