We examine whether the predictability and business-cycle dependence of excess returns in US Treasuries can be more naturally explained in terms of state-dependent risk premia or a specific cognitive bias (representativeness). We show that the extremely parsimonious cognitive-bias model in...

We study risk premium in US Treasury bonds. We decompose Treasury yields into inflation expectations and maturity-specific interest rate cycles, which we define as variation in yields orthogonal to expected inflation. The short-maturity cycle captures the real short-rate dynamics. Jointly with...