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    Expected returns in treasury bonds

    Cieslak, A. and Povala, Pavol (2013) Expected returns in treasury bonds. Working Paper. Social Science Electronic Publishing, Rochester, New York, USA.

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    Abstract

    We decompose Treasury yields into long-horizon inflation expectations and maturity related cycles. Cycles combine the risk premium and the business cycle variation in short rate expectations. From cycles, we construct a measure of expected bond returns. The risk premium factor varies at a frequency higher than the business cycle, and predicts excess bond returns in- and out-of sample. The decomposition captures in a parsimonious way the predictable element of bond returns usually measured with a linear combination of forward rates.

    Metadata

    Item Type: Monograph (Working Paper)
    Keyword(s) / Subject(s): term premia, bond return forecasting factor
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Research Centre: Applied Macroeconomics, Birkbeck Centre for
    Depositing User: Sarah Hall
    Date Deposited: 15 Apr 2014 10:50
    Last Modified: 06 Dec 2016 14:50
    URI: http://eprints.bbk.ac.uk/id/eprint/9600

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