This article proposes a general equilibrium model to explain the positive and sizable term premia implied by the data. The authors introduce a slow mean-reverting process of consumption growth and a segmented asset-market mechanism with heterogeneous trading technologies into an otherwise...

This paper estimates term risk premium and expected future spot rates embedded in Treasury forward rates to study the impact of short-term funding shortages on these quantities. Our approach is consistent with dynamic equilibrium models and avoids the arbitrage-free dynamic inconsistency...

New empirical facts show that equity term premium is counter-cyclical, while the term structure of equity yield is pro-cyclical and switches sign between expansions and recessions. We decompose the term structure of equity yield into an equity term premium and a mean reversion component about...

We propose a consumption-based model that allows for an inverted term structure of real and nominal risk-free rates. In our framework the agent is subject to time-varying macroeconomic risk and interest rates at all maturities depend on her risk perception which shape saving propensities over...

We propose a consumption-based model that allows for an inverted term structure of real and nominal risk-free rates. In our framework the agent is subject to time-varying macroeconomic risk, and interest rates at all maturities depend on her risk perception, which shapes saving propensities over...

Implicit in interest rate derivatives are Arrow-Debreu prices (or state price densities, SPDs) that contain fundamental information for risk and portfolio management in interest rate markets. To extract such information from interest rate derivatives, we propose a non-parametric method to...

In emerging market economies, currency appreciation goes hand in hand with compressed sovereign bond spreads, even for local currency sovereign bonds. This yield compression comes from a reduction in the credit risk premium. Crucially, the relevant exchange rate involved in yield compression is...

This paper proposes an equilibrium model to explain the positive and sizable term premia observed in the data. We introduce a slow mean-reverting process of consumption growth and a segmented asset market mechanism with heterogeneous trading technology to otherwise a standard heterogeneous agent...

This paper studies the impact of information processing and rational learning about economic fundamentals on the level and timing of risk premium in the cross-section of firms. Learning helps explain the level of the value premium, and why the term structure of risk premium is increasing for...