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Crump, Richard K.; Eusepi, Stefano; Mönch, Emanuel; … - 2021

Economic theory predicts that intertemporal decisions depend critically on expectations about future outcomes. Using …

Persistent link: https://www.econbiz.de/10012660381

Fundamental disagreement about monetary policy and the term structure of interest rates

Cao, Shuo; Crump, Richard K.; Eusepi, Stefano; Mönch, … - 2021 - Revised August 2021

Using a unique data set of individual professional forecasts, we document disagreement about the future path of monetary policy, particularly at longer horizons. The stark differences in short rate forecasts imply strong disagreement about the risk-return trade-off of longer-term bonds....

Persistent link: https://www.econbiz.de/10012249767

Fool's Errand? Robust Identification of Risk Premia and Expectations in Asset Prices

Guimaraes, Rodrigo - 2016

In this paper I show that the difficulty in estimating unconditional means from time series data alone is the cause for the lack of robustness in empirical estimates of the workhorse model in macro-finance. Using US and UK yield curve data and an extensive Monte Carlo study I show that using...

Persistent link: https://www.econbiz.de/10013006567

Model Uncertainty and Term Structure Anomalies

Wu, Ting - 2015

We construct an equilibrium term structure model that is robust to economic agent's uncertainty about the true data generating process. The low-dimensional two-factor long-run risk model captures the intuition that an ambiguity averse agent behaves pessimistically by attaching more weight to the...

Persistent link: https://www.econbiz.de/10013026648

Macroeconomic Uncertainty, Difference in Beliefs, and Bond Risk Premia

Buraschi, Andrea - 2015

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...

Persistent link: https://www.econbiz.de/10013038117

Direct Tests of the Expectations Theory of the Term Structure : Survey Expectations, the Term Premium and Coefficient Biases

Smant, David J.C. - 2011

A common perception in the literature seems to be that the expectations theory of the term structure of interest rates … premises. First, the general version of the expectations theory does not require a constant term premium. Second, contrary to … assumptions show that the expectations theory fits the term structure data very well …

Persistent link: https://www.econbiz.de/10013134030

Expected Bond Returns and the Credit Risk Premium

Afik, Zvika - 2014

A bond's expected return (EBR) is the ex-ante internal rate of return of the bond's expected future cash flows, whereas a bond's yield to maturity (YTM) is the internal rate of return of its promised future cash flows. In this paper we estimate the EBR for a sample of bonds using rating...

Persistent link: https://www.econbiz.de/10013061524

Categorical thinking about interest rates

Shue, Kelly; Townsend, Richard R.; Wang, Chen - 2024

We identify a common misconception that expected future changes in short-term interest rates predict corresponding future changes in long-term interest rates. People forecast similar shapes for the paths of short and long rates over the next four quarters. This is a mistake because long rates...

Persistent link: https://www.econbiz.de/10015164603

Term Premia and the News

Bauer, Michael D. - 2011

How do monetary policy expectations and term premia respond to news? This paper provides new answers to this question by means of a dynamic term structure model (DTSM) in which risk prices are restricted. This leads to more precise and more reliable estimates of expectations and term premium...

Persistent link: https://www.econbiz.de/10013128363

A class of Health-Jarrow-Morton models in which the unbiased expectations hypothesis holds

Riedel, Frank - 1997

The unbiased expectations hypothesis states that forward rates are unbiased estimates for future short rates. Cox, Ingersoll and Ross [1] conjectured that this hypothesis should be inconsistent with the absence of arbitrage possibilities. Using the framework of Heath, Jarrow and Morton [4] we...

Persistent link: https://www.econbiz.de/10009632605

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