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We examine large price changes, known as jumps, in the U.S. Treasury market. Using recently developed statistical tools, we identify price jumps in the 2-, 3-, 5-, 10-year notes and 30-year bond during the period of 2005-2006. Our results show that jumps mostly occur during prescheduled...
Persistent link: https://www.econbiz.de/10010279914
Persistent link: https://www.econbiz.de/10012094194
We examine large price changes, known as jumps, in the U.S. Treasury market. Using recently developed statistical tools, we identify price jumps in the 2-, 3-, 5-, 10-year notes and 30-year bond during the period of 2005-2006. Our results show that jumps mostly occur during prescheduled...
Persistent link: https://www.econbiz.de/10005536874
This paper presents a fully rational general equilibrium model that produces a time- varying exchange rate risk premium and solves the uncovered interest rate parity (U.I.P) puzzle. In this two-country model, agents are characterized by slow-moving external habit preferences derived from...
Persistent link: https://www.econbiz.de/10005443363
The volatility of the price-dividend ratio on stocks, the predictability of stock returns, and the lack of predictability in dividend growth are commonly interpreted as evidence of substantial time-variation in risk premia. We construct the wealth-consumption ratio for the U.S., the...
Persistent link: https://www.econbiz.de/10005443367
Investors earn positive excess returns on high interest rate foreign discount bonds, because these currencies appreciate on average. Lustig and Verdelhan (2005) show that investing in high interest rate foreign discount bonds exposes them to more aggregate consumption risk, while low interest...
Persistent link: https://www.econbiz.de/10005443370
Aggregate consumption growth risk explains why low interest rate curren- cies do not appreciate as much as the interest rate di®erential and why high interest rate currencies do not depreciate as much as the interest rate di®er- ential. Domestic investors earn negative excess returns on low...
Persistent link: https://www.econbiz.de/10004972891
This paper presents a model that reproduces the uncovered interest rate parity puzzle, based on a time-varying business-cycle related risk premium. Agents have preferences with external habits. During bad times in the home market, when the domestic habit is close to domestic consumption level,...
Persistent link: https://www.econbiz.de/10004972898
We find that average returns to currency carry trades decrease signicantly as the maturity of the foreign bonds increases, because investment currencies tend to have small local bond term premia. The downward term structure of carry trade risk premia is informative about the temporal nature of...
Persistent link: https://www.econbiz.de/10011133691
Changes in exchange rates are not random. Two economically motivated factors account for 20% to 90% of the daily, monthly, quarterly, and annual exchange rate movements in developed countries and in emerging and developing countries with floating exchange rates. The different shares of...
Persistent link: https://www.econbiz.de/10011080140