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Risks in macroeconomic fundamentals and excess bond returns predictability
De Rezende, Rafael B. - 2015 - February 2015
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 account for up to 31% of the variation in excess bond...
Persistent link: https://www.econbiz.de/10010478516
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Inflation uncertainty and disagreement in bond risk premia
D'Amico, Stefania; Orphanides, Athanasios - 2014
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...
Persistent link: https://www.econbiz.de/10010441139
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Model Uncertainty and Term Structure Anomalies
Wu, Ting - 2015
We construct an equilibrium term structure model that is robust to economic agent's uncertainty about the true data generating process. The low-dimensional two-factor long-run risk model captures the intuition that an ambiguity averse agent behaves pessimistically by attaching more weight to the...
Persistent link: https://www.econbiz.de/10013026648
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Macroeconomic Uncertainty, Difference in Beliefs, and Bond Risk Premia
Buraschi, Andrea - 2015
In this paper we study empirically the implications of macroeconomic disagreement for the time variation in bond market risk premia. If there is a source of heterogeneity in the belief structure of the economy then differences in beliefs can affect equilibrium asset prices, and the dynamics of...
Persistent link: https://www.econbiz.de/10013038117
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Uncertainty about Future Economic Policy and Expected Stock Returns - International Evidence
Heigermoser, Robert - 2020
I investigate the role of economic policy uncertainty (EPU), proxied by the news-based measure of Baker et al. (2016), in the cross-section of individual stock returns in 23 countries. I estimate a stock's beta toward its country-specific EPU index (βEPU) and show that stocks in the lowest...
Persistent link: https://www.econbiz.de/10012838386
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Loss Uncertainty, Gain Uncertainty, and Expected Stock Returns
Feunou, Bruno - 2019
We decompose the quadratic payoff on a stock into its loss and gain components and measure the premia associated with their fluctuations, called the loss and gain quadratic risk premium (QRP) respectively. The loss QRP interprets as the premium paid for downside risk hedging, while the gain QRP...
Persistent link: https://www.econbiz.de/10012900726
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Expected Equity Returns Should Correlate with Idiosyncratic Risk
Bruno, Giovanni - 2018
law of one price, and is present in all but risk-neutral economies. We test the cross-sectional predictions of our theory … equity than for assets, and stronger for more levered firms — consistent with the theory. We test also the timeseries … implications of the theory. Time variation in asset ivol causes time variation in the option value of equity that translates into …
Persistent link: https://www.econbiz.de/10012910108
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Loss Uncertainty, Gain Uncertainty, and Expected Stock Returns
Feunou, Bruno - 2019
We decompose the quadratic payoff on a stock into its loss and gain components and measure the premia associated with their fluctuations, called the loss and gain quadratic risk premium (QRP) respectively. The loss QRP interprets as the premium paid for downside risk hedging, while the gain QRP...
Persistent link: https://www.econbiz.de/10012899155
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Risk, Return, and Inflation Expectations
Dossani, Asad - 2019
This paper asks how inflation shocks affect the risk and return characteristics of different asset classes. For an unanticipated increase in inflation expectations, returns on equities and on the euro (relative to the dollar) increase, while returns on bonds and on gold decrease. Based on option...
Persistent link: https://www.econbiz.de/10012865116
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Individual Investors’ Sophistication and Risk and Return Expectations
Stålnacke, Oscar - 2015
This study investigates the impact of sophistication on individual investors' risk and return expectations using a survey directed towards a random sample of individual investors in Sweden. Eleven measures that previous studies have found to be related to sophistication are elicited for the...
Persistent link: https://www.econbiz.de/10013017302