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Currency Risk Premiums : A Multi-horizon Perspective
Chernov, Mikhail; Dahlquist, Magnus - National Bureau of Economic Research - 2023
We review the literature on multi-horizon currency risk premiums. We show how the multi-horizon implications arise from the classic present-value relationship. We further show how these implications manifest themselves in the interaction between bond and currency risk premiums. This link is...
Persistent link: https://www.econbiz.de/10014322805
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Movements in Yields, not the Equity Premium : Bernanke-Kuttner Redux
Nagel, Stefan; Xu, Zhengyang - National Bureau of Economic Research - 2024
We show that the stock market price reaction to monetary policy surprises upon announcements of the Federal Open Market Committee (FOMC) is explained mostly by changes in the default-free term structure of yields, not by changes in the equity premium. We reach this conclusion based on a new...
Persistent link: https://www.econbiz.de/10015056210
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Taxes, Default Risk, and Yield Spreads
Yawitz, Jess B. - 1983
This paper represents an extension and integration of recent empirical and theoretical research on default risk and taxability. The purpose of the paper is to develop and test a model of interest rate spreads which incorporates both the effect of taxes and differences in default probabilities in...
Persistent link: https://www.econbiz.de/10012477884
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The Term Structure of the Forward Premium
Hakkio, Craig S. - 1980
. The paper proposes an equilibrium theory of the term structure of the forward premium. By combining the theory of the term … expression for the expected one month forward premium. The theory will then impose highly non-linear cross equation restrictions … indicate that the data are consistent with the theory for Germany and inconsistent with the theory for Canada …
Persistent link: https://www.econbiz.de/10012478719
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A Quantity-Driven Theory of Term Premia and Exchange Rates
Greenwood, Robin - 2020
We develop a model in which specialized bond investors must absorb shocks to the supply and demand for long-term bonds in two currencies. Since long-term bonds and foreign exchange are both exposed to unexpected movements in short-term interest rates, a shift in the supply of long-term bonds in...
Persistent link: https://www.econbiz.de/10012481468
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A Preferred-Habitat Model of the Term Structure of Interest Rates
Vayanos, Dimitri - 2009
We model the term structure of interest rates as resulting from the interaction between investor clienteles with preferences for specific maturities and risk-averse arbitrageurs. Because arbitrageurs are risk averse, shocks to clienteles' demand for bonds affect the term structure---and...
Persistent link: https://www.econbiz.de/10012463162
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Arbitrage-Free Bond Pricing with Dynamic Macroeconomic Models
Gallmeyer, Michael F. - 2007
We examine the relationship between monetary-policy-induced changes in short interest rates and yields on long-maturity default-free bonds. The volatility of the long end of the term structure and its relationship with monetary policy are puzzling from the perspective of simple structural...
Persistent link: https://www.econbiz.de/10012465408
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A Simple Test of the Effect of Interest Rate Defense
Drazen, Allan - 2006
High interest rates to defend the exchange rate signal that a government is committed to fixed exchange rates, but may also signal weak fundamentals. We test the effectiveness of the interest rate defense by disaggregating into the effects on future interest rates differentials, expectations of...
Persistent link: https://www.econbiz.de/10012466045
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Risk, Uncertainty and Asset Prices
Bekaert, Geert - 2006
We identify the relative importance of changes in the conditional variance of fundamentals (which we call "uncertainty") and changes in risk aversion ("risk" for short) in the determination of the term structure, equity prices and risk premiums. Theoretically, we introduce persistent...
Persistent link: https://www.econbiz.de/10012466420
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Expectation Puzzles, Time-varying Risk Premia, and Dynamic Models of the Term Structure
Dai, Qiang - 2001
traditional expectations theory,' we show that these findings are not puzzling relative to a large class of richer dynamic term …
Persistent link: https://www.econbiz.de/10012470559