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The Zero-Beta Interest Rate
Di Tella, Sebastian; Hébert, Benjamin; Kurlat, Pablo; … - National Bureau of Economic Research - 2023
We use equity returns to construct a time-varying measure of the interest rate that we call the zero-beta rate: the expected return of a stock portfolio orthogonal to the stochastic discount factor. The zero-beta rate is high and volatile. In contrast to safe rates, the zero-beta rate fits the...
Persistent link: https://www.econbiz.de/10014337830
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A Monetary Policy Asset Pricing Model
Caballero, Ricardo J.; Simsek, Alp - National Bureau of Economic Research - 2022
needs to set. These perceived "mistakes" induce a policy risk premium and may generate a "behind the curve" phenomenon …
Persistent link: https://www.econbiz.de/10013334351
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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 … between bond and currency risk premiums. This link is strengthened by explicitly accounting for stochastic discount factors …. Information about currency risk premiums at different horizons presents a wealth of new evidence and challenges for existing …
Persistent link: https://www.econbiz.de/10014322805
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Sticky Discount Rates
Fukui, Masao; Gormsen, Niels; Huber, Kilian - National Bureau of Economic Research - 2024
We show that firms' nominal required returns to capital (i.e., their discount rates) are sticky with respect to expected inflation. Such nominally sticky discount rates imply that increases in expected inflation directly lower firms' real discount rates and thereby raise real investment. We...
Persistent link: https://www.econbiz.de/10014512092
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A General Stochastic Volatility Model for the Pricing and Forecasting of Interest Rate Derivatives
Trolle, Anders B. - 2006
-coupon bond options and dynamics of the forward rate curve, under both the actual and risk-neutral measure, in terms of a finite …
Persistent link: https://www.econbiz.de/10012466328
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Investors' Portfolio Behavior Under Alternative Models of Long-Term Interest Rate Expectations : Unitary, Rational, or Autoregressive
Friedman, Benjamin M. - 1980
This paper develops behavioral relationships explaining investors' demands for long-term bonds, using three alternative hypotheses about investors' expectations of future bond prices (yields). The results, based on U.S. 'data for six major categories of bond market investors, consistently...
Persistent link: https://www.econbiz.de/10012478678
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Price Inflation, Portfolio Choice, and Nominal Interest Rates
Friedman, Benjamin M. - 1978
important lenders' portfolio behavior can be in bringing about the adjustment of interest rates which Fisher's theory associates … with expected inflation. Given the importance of this adjustment for questions of both monetary theory and monetary policy …
Persistent link: https://www.econbiz.de/10012478903
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Central Banks, Stock Markets, and the Real Economy
Caballero, Ricardo J.; Simsek, Alp - National Bureau of Economic Research - 2024
shocks, and generate a policy risk premium …
Persistent link: https://www.econbiz.de/10014468253
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Global Natural Rates in the Long Run : Postwar Macro Trends and the Market-Implied r* in 10 Advanced Economies
Davis, Joshua M.; Fuenzalida, Cristian; Huetsch, Leon; … - National Bureau of Economic Research - 2023
Benchmark finance and macroeconomic models appear to deliver conflicting estimates of the natural rate and bond risk …* and π*, and not bond risk premia. Global components of unexpected bond returns are influential, while the local components … theory and previous findings …
Persistent link: https://www.econbiz.de/10014421212
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Endogenous Volatility at the Zero Lower Bound : Implications for Stabilization Policy
Basu, Susanto - 2015
At the zero lower bound, the central bank's inability to offset shocks endogenously generates volatility. In this setting, an increase in uncertainty about future shocks causes significant contractions in the economy and may lead to non-existence of an equilibrium. The form of the monetary...
Persistent link: https://www.econbiz.de/10012456833