Bond Risk Premia: The Information in Really Long-Maturity Forward Rates

2021 ◽  
Author(s):  
Andrea Berardi ◽  
Roger Brown ◽  
Stephen M. Schaefer
Keyword(s):  
Risk Premia ◽  
Forward Rates ◽  
Bond Risk Premia ◽  
Bond Risk

scholarly journals Bond risk premia and the return forecasting factor

2019 ◽  
Vol 24 (1) ◽  
Author(s):  
Agustin Gutierrez ◽  
Constantino Hevia ◽  
Martin Sola
Keyword(s):  
Term Structure ◽  
Yield Curve ◽  
Risk Premia ◽  
Term Structure Model ◽  
Forward Rates ◽  
Bond Risk Premia ◽  
Bond Returns ◽  
Main Driver ◽  
Bond Risk ◽  
Better Than

Abstract The return forecasting factor is a linear combination of forward rates that seems to predict 1-year excess bond returns of bond of all maturities better than traditional measures obtained from the yield curve. If this single factor actually captures all the relevant fluctuations in bond risk premia, then it should also summarize all the economically relevant variations in excess returns considering different holding periods. We find that it does not. We conclude that including the return forecasting factor as the main driver of risk premia in a term structure model, as has been suggested, is not supported by the data.

scholarly journals Short-Run Bond Risk Premia

2019 ◽  
Vol 09 (03) ◽  
pp. 1950011
Author(s):  
Philippe Mueller ◽  
Andrea Vedolin ◽  
Hao Zhou
Keyword(s):  
Risk Premium ◽  
Predictive Power ◽  
Risk Premia ◽  
Forward Rates ◽  
Variance Risk Premium ◽  
Bond Risk Premia ◽  
Short Run ◽  
Variance Risk ◽  
Bond Risk ◽  
The One

In the short-run, bond risk premia exhibit pronounced spikes around major economic and financial crises. In contrast, long-term bond risk premia feature cyclical swings. We empirically examine the predictability of the market variance risk premium — a proxy of economic uncertainty — for bond risk premia and we show the strong predictive power for the one-month horizon that quickly recedes for longer horizons. The variance risk premium is largely orthogonal to well-established bond return predictors — forward rates, jumps, and macro variables. We rationalize our empirical findings in an equilibrium model of uncertainty about consumption and inflation which is coupled with recursive preferences. We show that the model can quantitatively explain the levels of bond and variance risk premia as well as the predictive power of the variance risk premium, while jointly matching salient features of other asset prices.

scholarly journals Bond Risk Premia

2005 ◽  
Vol 95 (1) ◽  
pp. 138-160 ◽  
Author(s):  
John H Cochrane ◽  
Monika Piazzesi
Keyword(s):  
Stock Returns ◽  
Term Structure ◽  
Measurement Errors ◽  
Risk Premia ◽  
Excess Returns ◽  
Forward Rates ◽  
Bond Risk Premia ◽  
Bond Returns ◽  
Bond Risk ◽  
One Year

We study time variation in expected excess bond returns. We run regressions of one-year excess returns on initial forward rates. We find that a single factor, a single tent-shaped linear combination of forward rates, predicts excess returns on one-to five-year maturity bonds with R2 up to 0.44. The return-forecasting factor is countercyclical and forecasts stock returns. An important component of the return-forecasting factor is unrelated to the level, slope, and curvature movements described by most term structure models. We document that measurement errors do not affect our central results.

Bond Risk Premia and Realized Jump Risk

2008 ◽  
Author(s):  
Jonathan H. Wright ◽  
Hao Zhou
Keyword(s):  
Risk Premia ◽  
Jump Risk ◽  
Bond Risk Premia ◽  
Bond Risk

Discount Factors, Disagreement, and Bond Risk Premia

2011 ◽  
Author(s):  
Andrea Buraschi ◽  
Paul Whelan
Keyword(s):  
Risk Premia ◽  
Discount Factors ◽  
Bond Risk Premia ◽  
Bond Risk

Corporate Bond Risk Premia

2013 ◽  
Author(s):  
Christian Speck
Keyword(s):  
Risk Premia ◽  
Corporate Bond ◽  
Bond Risk Premia ◽  
Bond Risk

Macro-Expectations and Bond Risk Premia

2014 ◽  
Author(s):  
Jonas Nygaard Eriksen
Keyword(s):  
Risk Premia ◽  
Bond Risk Premia ◽  
Bond Risk

scholarly journals Monetary policy, bond risk premia, and the economy

2015 ◽  
Vol 76 ◽  
pp. 124-140 ◽  
Author(s):  
Peter N. Ireland
Keyword(s):  
Monetary Policy ◽  
Risk Premia ◽  
Bond Risk Premia ◽  
Bond Risk
Sign in / Sign up

Export Citation Format

Share Document