It is a widely encountered misconception that the vector of spreads between longer-term interest rates and the short rate is stationary under the Expectations Theory (ET). By considering a complete term structure of maturities it is shown that the ET determines the conditional mean of the VAR...

We show that two macroeconomic factors have an important predictive content for governmentbond yields and excess returns. These factors are not spanned by the cross-section of yields andare well proxied by economic growth and real interest rates.

This paper proposes a new test for factor loading structural change in dynamic factor models. The proposed test is robust to the nonmonotonic power problem that occurs if the factor loadings exhibit structural changes at common dates over cross-sections. To illustrate the usefulness of our test,...

I discuss how the unconventional monetary policy measures implemented over the past several years – quantitative and credit easing, and forward guidance – can be analysed in the context of conventional models of asset prices, with particular reference to exchange rates. I then discuss...

This study investigates how unexpected announcements in Brazilian and U.S. macroeconomic indicators affect the term structure of nominal interest rates, as well as implicit inflation expectations and real interest rates. Using daily data from March 2005 to December 2012, we employ an extended...

An event study methodology shows that the relative yields of off-the-run Treasury securities are not insulated from the effects related to the auction calendar. A statistically significant but short-lived increase in relative yields is associated with the introduction of additional cashflows at...

The average return on long-term bonds exceeds the return on short-term bills by a large amount over short investment horizons. A riding-the-yield-curve investment strategy takes advantage of the higher returns on longer term bonds. This strategy involves the purchase of bonds with maturities...

Many variations exist of yield curve modeling based on the exponential components framework, but most do not consider the generating process of the error term. In this paper, we propose a method of yield curve estimation using an instantaneous error term generated with a standard Brownian...