Cochrane and Piazzesi (2005) show that (i) lagged forward rates improve the predictability of annual bond returns, adding to current forward rates, and that (ii) a Markovian model for monthly forward rates cannot generate the pattern of predictability in annual returns. These results stand as a...

We build a small-scale representation of an economy in which the short rate, inflation and output exhibit unobserved secular and cyclical components that both drive bond yields. We impose the economic restriction that expected bond returns are purely cyclical so that their variance does not...

Cochrane and Piazzesi (2005) show that (i) lagged forward rates help predict bond returns and that (ii) modern Markovian dynamic term structure models (DTSMs) cannot match the evidence. We develop the family of Conditional Mean DTSMs where the dynamics depend on current yields and their history...

We build a model for bond yields based on a small-scale representation of an economy with secular declines in inflation, the real rate and output growth. Long-run restrictions identify nominal shocks that influence long-run inflation but do not influence the long-run real rate or output growth....

We provide a decomposition of nominal yields into real yields, expectations of future inflation and inflation risk premiums when real bonds or inflation swaps are unavailable or unreliable due to their relative illiquidity. We combine nominal yields with surveys of inflation forecasts within a...

We build a model for bond yields based on a small-scale representation of an economy with secular declines in inflation, the real rate and output growth. Long-run restrictions identify nominal shocks that influence long-run inflation but do not influence the long-run real rate or output growth....

We provide a novel daily decomposition of the real exchange rate that exploits a direct link between bond and foreign exchange (FX) markets. Real exchange rate dynamics can be attributed to changes in the expected future level of the exchange rate; cross-country differentials of expected...

Cochrane and Piazzesi (2005) show that (i) lagged forward rates improve the predictability of annual bond returns, adding to current forward rates, and that (ii) a Markovian model for monthly forward rates cannot generate the pattern of predictability in annual returns. These results stand as a...

We provide a decomposition of nominal yields into real yields, expectations of future inflation and inflation risk premiums when real bonds or inflation swaps are unavailable or unreliable due to their relative illiquidity. We combine nominal yields with surveys of inflation forecasts within a...

Macro news have large impact on bond yields in high-frequency data. We aggregate the impact of macro news within each month, which we use in a no-arbitrage term structure models. We find that macro news explain 50 percent in the term premium of the 10-year bond at the monthly frequency and 40...