The Volatility of Long-Term Bond Returns: Persistent Interest Shocks and Time-Varying Risk Premiums

• 成果类型: Article
• 署名作者: Osterrieder, Daniela u; Schotman, Peter C.
• 署名单位: Rutgers University System; Rutgers University New Brunswick; Maastricht University; Tilburg University
• 刊物名称: REVIEW OF ECONOMICS AND STATISTICS
• ISSN/ISSBN: 0034-6535
• DOI: 10.1162/REST_a_00624
• 发表日期: 2017-12
• 页码: 884-895
• 关键词: uncertainty empirical-evidence; international panel dataset; local whittle estimation; structure models; interest-rates; inflation uncertainty; expectations hypothesis; fractional-integration; affine models; cross-section

摘要

We develop an almost affine term-structure model with a closed-form solution for factor loadings in which the spot rate and the risk price are fractionally integrated processes with different integration orders. This model is used to explain two stylized facts. First, predictability of longterm excess bond returns requires sufficient volatility and persistence in the risk price. Second, the large volatility of long-term bond returns requires persistence in the spot rate. Decomposing long-term bond returns, we find that the expectations component from the level factor is more volatile than returns themselves and that the risk premium correlates negatively with level-factor innovations.