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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 Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
Research Centres and Institutes: Applied Macroeconomics, Birkbeck Centre for
Depositing User: Sarah Hall
Date Deposited: 15 Apr 2014 10:50
Last Modified: 02 Aug 2023 17:10
URI: https://eprints.bbk.ac.uk/id/eprint/9600

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