We develop a framework for measuring biases in expectation formation. The basic insight is that under- and overreaction to new information is identified by the impulse response function of forecast errors. This insight leads to a simple and widely applicable measurement procedure. The procedure...

Conditional yield skewness is an important summary statistic of the state of the economy. It exhibits pronounced variation over the business cycle and with the stance of monetary policy, and a tight relationship with the slope of the yield curve. Most importantly, variation in yield skewness has...