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We derive a simple expression for the sensitivity of duration, convexity, and higher-order bond risk measures to … effects of term structure level, slope, and curvature shifts on any specific bond risk measure. These results are particularly …
Persistent link: https://www.econbiz.de/10013211994
It is well-known that interest rates are extremely persistent, yet they are best modeled and understood as stationary processes. These properties are contradictory in the workhorse Gaussian affine term structure model in which persistent data often result in unit roots that imply...
Persistent link: https://www.econbiz.de/10012111254
Equilibrium bond-pricing models rely on inflation being bad news for future growth to generate upward-sloping nominal yield curves. We develop a model that can generate upward-sloping nominal and real yield curves by instead using ambiguity about inflation and growth. Ambiguity can help resolve...
Persistent link: https://www.econbiz.de/10011864574
Recent findings on the term structure of equity and bond yields pose serious challenges to existing models of equilibrium asset pricing. This paper presents a new equilibrium model of subjective expectations to explain the joint historical dynamics of equity and bond yields (and their yield...
Persistent link: https://www.econbiz.de/10013193433
through July 2013. Given a corresponding long-short strategy with no absolute duration risk, excess returns and information … return distributions are positively skewed, and momentum loads, if in any way, favorably on broad risk factors. Returns …
Persistent link: https://www.econbiz.de/10010222891
This paper presents a present-biased general equilibrium model that explains many features of bond behavior. Present-biased investors increase (decrease) short-term (long-term) hedge demands compared to standard preferences. Hence, present bias drives up (down) short-term bond prices (yields)...
Persistent link: https://www.econbiz.de/10012822757
I provide evidence that risks in macroeconomic fundamentals contain valuable information about bond risk premia. I … extract factors from a set of quantile-based risk measures estimated for US macroeconomic variables and document that they … unemployment rate. In addition, factors provide information about bond risk premia variation that is largely unrelated to that …
Persistent link: https://www.econbiz.de/10010478516
A downward-sloping term structure of equity and upward-sloping term structures of interest rates arise endogenously in a general-equilibrium model with nominal rigidities and nonlinear habits in consumption. Countercyclical marginal costs exacerbate the procyclicality of dividends after a...
Persistent link: https://www.econbiz.de/10013016903
A downward-sloping term structure of equity and upward-sloping term structures of interest rates arise endogenously in a general-equilibrium model with nominal rigidities and nonlinear habits in consumption. Countercyclical marginal costs exacerbate the procyclicality of dividends after a...
Persistent link: https://www.econbiz.de/10013019905
This paper characterizes time variation in the link between macroeconomic risk and variation in the yield curve. Based …
Persistent link: https://www.econbiz.de/10013314107