A Long-Run Risks Explanation of Predictability Puzzles in Bond and Currency Markets

We show that bond risk premia rise with uncertainty about expected inflation and fall with uncertainty about expected growth; the magnitude of return predictability using these uncertainty measures is similar to that by multiple yields. Motivated by this evidence, we develop and estimate a long-run...

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Bibliographic Details
Published in:	The Review of financial studies 2013-01, Vol.26 (1), p.1-33
Main Authors:	Bansal, Ravi, Shaliastovich, Ivan
Format:	Article
Language:	English
Subjects:	Analytical forecasting Anticipated inflation Asset valuation Bond markets Bonds Consumption Credit market Currency Currency markets Devisenmarkt Economic growth Economic growth models Economic models Economic theory Economic uncertainty Financial risk Foreign exchange markets Inflation Inflation rates Inflationserwartung Markets Modeling Monetary economics Predictability Prognose Rentenmarkt Risikoprämie Risk premiums Studies Theorie Uncertainty Violations Volatility Wirtschaftswachstum
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