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Robust bond risk premia
Bauer, Michael D.; Hamilton, James D. - 2015 - Rev.: September 25, 2015
A consensus has recently emerged that a number of variables in addition to the level, slope, and curvature of the term structure can help predict interest rates and excess bond returns. We demonstrate that the statistical tests that have been used to support this conclusion are subject to very...
Persistent link: https://www.econbiz.de/10011346306
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Cash flow duration and the term structure of equity returns
Weber, Michael - 2016
The term structure of equity returns is downward-sloping: stocks with high cash flow duration earn 1.10% per month … lower returns than short-duration stocks in the cross section. I create a measure of cash flow duration at the firm level … for short-sale constraints, and find the negative cross-sectional relationship between cash flow duration and returns is …
Persistent link: https://www.econbiz.de/10011521939
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How do banks and households manage interest rate risk? : evidence from the Swiss mortgage market
Basten, Christoph; Guin, Benjamin; Koch, Cathérine - 2017
We exploit a unique data set that features both un-intermediated mortgage requests and independent offers from multiple banks for each request. We show that households typically are not prudent risk managers but prioritize the minimization of current mortgage payments over the risk of possible...
Persistent link: https://www.econbiz.de/10011721608
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How should the distant future be discounted when discount rates are uncertain?
Gollier, Christian; Weitzman, Martin L. - 2009
It is not immediately clear how to discount distant-future events, like climate change, when the distant-future discount rate itself is uncertain. The so-called "Weitzman-Gollier puzzle" is the fact that two seemingly symmetric and equally plausible ways of dealing with uncertain future discount...
Persistent link: https://www.econbiz.de/10003910677
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Inflation, endogenous market segmentation and the term structure of interest rates
Vries, Casper G. de; Wang, Xuedong - 2015
The term structure of interest rates does not adhere to the expectations hypothesis, possibly due to a risk premium. We consider the implications of a risk premium that arises from endogenous market segmentation driven by variable inflation rates. In the absence of autocorrelation in inflation,...
Persistent link: https://www.econbiz.de/10011288797
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Evaluation of long-dated investments under uncertain growth trend, volatility and catastrophes
Gollier, Christian - 2012
Because of the uncertainty about how to model the growth process of our economy, there is still much confusion about which discount rates should be used to evaluate actions having long-lasting impacts, as in the contexts of climate change, social security reforms or large public infrastructures...
Persistent link: https://www.econbiz.de/10009689360
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Asset pricing with uncertain betas : a long-term perspective
Gollier, Christian - 2013
How should one evaluate investment projects whose CCAPM betas are uncertain? This question is particularly crucial for projects yielding long-lasting impacts on the economy, as is the case for example for many green investments. We define the notion of a certainty equivalent beta. We show that...
Persistent link: https://www.econbiz.de/10009691703
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A re-examination of the link between real exchange rates and real interest rate differentials
Hoffmann, Mathias; MacDonald, Ronald - 2003
The real exchange rate - real interest rate (RERI) relationship is central to most open economy macroeconomic models. However, empirical support for the relationship, especially when cointegrationbased methods are used, is rather weak. In this paper we reinvestigate the RERI relationship using...
Persistent link: https://www.econbiz.de/10011506475
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Resolving the spanning puzzle in macro-finance term structure models
Bauer, Michael D.; Rudebusch, Glenn D. - 2015
Previous macro-finance term structure models (MTSMs) imply that macroeconomic state variables are spanned by (i.e., perfectly correlated with) model-implied bond yields. However, this theoretical implication appears inconsistent with regressions showing that much macroeconomic variation is...
Persistent link: https://www.econbiz.de/10010476670
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Restrictions on risk prices in dynamic term structure models
Bauer, Michael D. - 2015
Restrictions on the risk-pricing in dynamic term structure models (DTSMs) can unleash the power of no-arbitrage by creating a tighter link between cross-sectional and time-series variation of interest rates. This paper presents a new econometric framework for estimation of affine Gaussian DTSMs...
Persistent link: https://www.econbiz.de/10010491726