The Cross Section of MBS Returns

• 成果类型: Article
• 署名作者: Diep, Peter; Eisfeldt, Andrea L.; Richardson, Scott
• 署名单位: University of California System; University of California Los Angeles; National Bureau of Economic Research; University of London; London Business School
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13055
• 发表日期: 2021
• 页码: 2093-2151
• 关键词: mortgage-backed securities; PREPAYMENT RISK; valuation; MARKET; equilibrium; liquidity; arbitrage; LIMITS

摘要

We present a simple, linear asset pricing model of the cross section of Mortgage-Backed Security (MBS) returns. MBS earn risk premia as compensation for their exposure to prepayment risk. We measure prepayment risk and estimate risk loadings using prepayment forecasts versus realizations. Estimated loadings on prepayment risk decrease monotonically in securities' coupons relative to the par coupon, consistent with the predicted effect of prepayment on bond value. Prepayment risk appears to be priced by specialized MBS investors. The price of prepayment risk changes sign over time with the sign of a representative MBS investor's exposure to prepayment shocks.