We introduce heterogeneity in the pricing of aggregate risks of various persistence into a dynamic corporate finance model with financing frictions. We show that if long-term (persistent) shocks have a higher market price than short-term (temporary) shocks, firms shorten the horizon of corporate...

This study considers the role of the yield curve as a predictor of future interest rates, inflation rates and economic activity for New Zealand. To provide a basis for comparison, data from Australia and the US are also considered. Many studies have shown a strong empirical link between the...

This study explores a new modelling approach that bridges the gap between multilateral country-level data and the bilateral-model based, goods-market specific purchasing power parity (PPP) hypothesis. Under this approach, PPP is embedded in latent common factors, extractable from a large set of...

This study explores a new modelling approach to bridge the gap between the bilateral setting of one 'domestic' economy facing one 'foreign' entity in theory and multilateral country data in reality. Under the approach, purchasing power parity (PPP) is embedded in latent disequilibrium factors,...

The aim of this paper is to analyze the relation between maturity structure, sovereign bond yields and sovereign risk in the Economic and Monetary Union for the period of 1990–2013. The results confirm the existence of an inverse relationship between sovereign bond yields, sovereign risk and...

This paper attempts to provide an economic interpretation of the factors that drive the movements of interest rates of bonds of different maturities in a continuous-time no-arbitrage term structure model for Chile. The dynamics of yields in the model are explained by two latent factors, namely...

Yield on Government Bonds form the benchmark “risk free rate of return” for the pricing of all financial assets and their derivatives. Yield spread of government bonds is an indicator of efficiency of the treasury market, which is essential for an effective monetary policy. This is one of...

I estimate a dynamic term-structure model with time-varying risk premia on a panel of Treasury coupon bonds, without relying on an interpolated zero-coupon yield curve or a selection of maturities. The model implies that level prices of zero-coupon bonds are linear functions of latent factors,...

I estimate a dynamic term-structure model with time-varying risk premia on a panel of Treasury coupon bonds, without relying on an interpolated zero-coupon yield curve or a selection of maturities. The model allows me to incorporate prices and realized returns of coupon bonds into the estimation...

In this paper, we extract common factors from a cross-section of U.S. macro-variables and Treasury zero-coupon yields. We find that two macroeconomic factors have an important predictive content for government bond yields and excess returns. These factors are not spanned by the cross-section of...