Why does the short-term slope of the yield curve predict recessions? We explore the economic forces underlying Treasury yields' fluctuations and highlight the roles of a tight monetary policy stance and expectations of lower inflation in predicting downturns. While the monetary policy stance is...

Why is an inverted yield-curve slope such a powerful predictor of future recessions? We show that a decomposition of the yield curve slope into its expectations and risk premia components helps disentangle the channels that connect fluctuations in Treasury rates and the future state of the...

The standard way to summarize the yield curve is to use the first three principal components of the yield curve, resulting in level, slope and curvature factors. Yields, however, are non-stationary. We analyze the first three principal components of yield changes, which correspond to changes in...

This paper investigates bond risk premia in the framework of predictive systems. Different from the traditional linear predictive models, predictive systems allow predictors to be imperfectly correlated with conditional expected returns, and could incorporate prior beliefs on the negative...

This research investigates the macro factors for forecasting (1) bond risk premia and (2) term structure of government bond yields by using Bayesian Model Averaging (BMA) based on empirical prior. Different from the traditional variable selection approach which advocates finding an...

This paper studies the predictability of bond risk premia by means of expectations to future business conditions using survey forecasts from the Survey of Professional Forecasters. We show that expected business conditions consistently affect excess bond returns and that the inclusion of...

This paper examines the relation between variations in perceived inflation uncertainty and bond premia. Using the subjective probability distributions available in the Survey of Professional Forecasters we construct a quarterly time series of average individual uncertainty about inflation...

This paper addresses this question with an asset-pricing model featuring endogenous corporate policies. Long-run risk reflects a firm's profit exposure to slowly-moving expected consumption growth, whereas short-run risk captures the exposure to frequent unexpected changes in consumption growth....

This paper examines the predictive performance of machine learning methods in estimating the illiquidity of U.S. corporate bonds. We compare the predictive performance of machine learning-based estimators (linear regressions, tree-based models, and neural networks) to that of the most commonly...

This paper studies whether the evident statistical predictability of bond risk premia translates into economic gains for investors. We propose a novel estimation strategy for a ne term structure models that jointly fits yields and bond excess returns, thereby capturing predictive information...