Cieslak, A. and Povala, Pavol (2015) Expected returns in Treasury Bonds. Review of Financial Studies 28 (10), pp. 2859-2901. ISSN 0893-9454.
Abstract
We study risk premium in U.S. Treasury bonds. We decompose Treasury yields into inflation expectations and maturity-specific interest-rate cycles, which we define as variation in yields orthogonal to expected inflation. The short-maturity cycle captures the real short-rate dynamics. Jointly with expected inflation, it comprises the expectations hypothesis (EH) term in the yield curve. Controlling for the EH term, we extract a measure of risk-premium variation from yields. The risk-premium factor forecasts excess bond returns in and out of sample and subsumes the common bond return predictor obtained as a linear combination of forward rates.
Metadata
| Item Type: | Article |
|---|---|
| School: | Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School |
| Depositing User: | Administrator |
| Date Deposited: | 05 Feb 2020 18:39 |
| Last Modified: | 02 Aug 2023 17:57 |
| URI: | https://eprints.bbk.ac.uk/id/eprint/30835 |
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