The Persistence in Volatility of the US Term Premium 1970-1986
This paper examines the persistence of the volatility of the risk premia for excess holding period returns of the term structure using a GARCH-M model of the conditional variance. The finding of a high degree of persistance cannot be sustained once allowance is made for a structural break in the unconditional variance caused by a change in the operation of US monetary policy during 1979-1982.
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- Backus, David K & Gregory, Allan W, 1993.
"Theoretical Relations between Risk Premiums and Conditional Variances,"
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