info:eu-repo/semantics/article
Bond risk premia and the return forecasting factor
Fecha
2020-02Registro en:
Gutierrez, Agustin; Hevia, Constantino; Sola, Martin; Bond risk premia and the return forecasting factor; De Gruyter; Studies In Nonlinear Dynamics And Econometrics; 2-2020; 1-12
1081-1826
CONICET Digital
CONICET
Autor
Gutierrez, Agustin
Hevia, Constantino
Sola, Martin
Resumen
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.