IDEAS home Printed from https://ideas.repec.org/a/bpj/sndecm/v24y2020i1p12n2.html
   My bibliography  Save this article

Bond risk premia and the return forecasting factor

Author

Listed:
  • Gutierrez Agustin

    (University of Chicago, Economics, Chicago, IL, United States of America)

  • Hevia Constantino

    (Universidad Torcuato Di Tella, Economics, Buenos Aires, Argentina)

  • Sola Martin

    (Universidad Torcuato Di Tella, Buenos Aires, Argentina)

Abstract

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.

Suggested Citation

  • Gutierrez Agustin & Hevia Constantino & Sola Martin, 2020. "Bond risk premia and the return forecasting factor," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 24(1), pages 1-12, February.
    • Handle: RePEc:bpj:sndecm:v:24:y:2020:i:1:p:12:n:2
    DOI: 10.1515/snde-2018-0009
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/snde-2018-0009
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/snde-2018-0009?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:sndecm:v:24:y:2020:i:1:p:12:n:2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.