International evidence on bond risk premia
AbstractThis paper revisits the study of time-varying excess bond returns in international bond markets. Using newly available yield curve data from 10 different countries with independent monetary policy, I test the robustness of Cochrane and Piazzesi (2005). For most countries in my sample, I find more modest predictive power for forward rates than originally found by Cochrane and Piazzesi (2005) for the US. Their single-factor model captures well the predictability in international data, and this factor also tends to have a tent-shape in most countries of my sample. CP factors are more idiosyncratic across countries than yields or forward rates. Finally, I show that the recent financial crisis has significantly affected the predictability of excess bond returns.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Banking & Finance.
Volume (Year): 35 (2011)
Issue (Month): 1 (January)
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Bond risk premia International markets Predictability Financial crisis;
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