We generalize the asset dynamics assumptions of Leland (1994b) and Leland and Toft (1996) to a much richer class of models. By assuming a stationary corporate debt structure with constant principal, coupon payment and average maturity through continuous retirement and refinancing as long as the...

This paper develops and estimates a Quadratic-Gaussian model of the U.S. term structure that can accommodate the rich dynamics of inflation risk premia over the 1983-2013 period by allowing for time-varying market prices of inflation risk and incorporating survey information on inflation...

We solve a dynamic general equilibrium model with generalized disappointment aversion preferences and continuous state endowment dynamics. We apply the framework to the term structure of interest rates and show that the model generates an upward sloping term structure of nominal interest rates,...

This paper offers an explanation for the properties of the nominal term structure of interest rates and time-varying bond risk premia based on a model with rare consumption disaster risk. In the model, consumption is subject to large negative jumps (disasters), and these disasters are sometimes...

In contrast to prior equity market results, we document that corporate bonds issued by low profitability firms outperform bonds issued by highly profitable firms. This performance difference is primarily driven by low profitability, low credit rating firms. This profitability premium is...

We examine return premia associated with the level, slope, and curvature of the yield curve over time and across countries from a novel perspective by borrowing pricing factors from other asset classes. Measures of value, momentum, and carry, when applied to bonds, provide a rich description of...

Term premiums, defined as the excess return of long-dated contracts over short-dated contracts, in commodity futures are strongly predictable, both in the time series and in the cross section, by roll yield spreads. Strategies that exploit this predictability show sizable Sharpe ratios and are...

This paper proposes a consumption based asset pricing model in which the dynamic term structure of equity premia captures the stylized behavior of empirical counterpart. In the fi nancial crisis in late 2000s, the level of equity premium went up and especially the equity premium for a short...

Do credit spreads signal firm investment opportunities just like Tobin's q? Because both credit spreads and Tobin's q are market prices, they should contain similar information about the firm. I develop an investment model in which an analytical relation is established between the marginal q and...

In this paper we study empirically the implications of macroeconomic disagreement for the time variation in bond market risk premia. If there is a source of heterogeneity in the belief structure of the economy then differences in beliefs can affect equilibrium asset prices, and the dynamics of...