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Economic events and the volatility of government bill rates

Author

Listed:
  • Chao Xiao
  • Yu Lou
  • Jie Liu
  • Yuan Zhao
  • Yikang Tian

Abstract

Many studies show that in many countries (especially the G7), volatility in government bill rates far exceeds that in consumption growth rates. This volatility puzzle cannot be predicted by traditional disaster models, in which rare economic disasters are defined as a peak-to-trough percent fall in consumption (or real per capita GDP) by a high threshold (≥10%). For this purpose, we extend the traditional definition of rare economic disasters and propose a novel asset pricing model that models both good and bad events. We define a bad (or good) event as a peak-to-trough absolute decline (or a trough-to-peak absolute rise) in consumption growth rates by a low threshold (

Suggested Citation

  • Chao Xiao & Yu Lou & Jie Liu & Yuan Zhao & Yikang Tian, 2022. "Economic events and the volatility of government bill rates," PLOS ONE, Public Library of Science, vol. 17(10), pages 1-21, October.
    • Handle: RePEc:plo:pone00:0276345
    DOI: 10.1371/journal.pone.0276345
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    References listed on IDEAS

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