This chapter discusses what the asset-pricing literature concludes about the forecastability of interest rates. It outlines forecasting methodologies implied by this literature, including dynamic, no-arbitrage term structure models and their macro-finance extensions. It also reviews the...

This chapter discusses what the asset-pricing literature concludes about the forecastability of interest rates. It outlines forecasting methodologies implied by this literature, including dynamic, no-arbitrage term structure models and their macro-finance extensions. It also reviews the...

Shocks to nominal bond yields are comprised of news about expected future inflation, news about expected future real short rates, and news about expected excess returns — all over the life of the bond. I estimate the magnitude of the first component for short and long maturity Treasury bonds....