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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26964
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| Title: | Ex Ante Bond Returns and the Yield Curve |
| Authors: | Jacob, Boudoukh
Richardson, Matthew
Smith, Tom
Whitelaw, Robert F. |
| Issue Date: | 29-Mar-1996 |
| Series/Report no.: | FIN-96-017 |
| Abstract: | We provide a test of the liquidity preference hypothesis (i.e., the
monotonicity of ex ante term premiums), conditioning on the shape of the
yield curve. The approach we use is general, and does not require a
structural model for conditional expected returns. Using nonparametric
estimates, the evidence supports previous conclusions in the literature
regarding time-varying negative term premiums. For example, in periods
in which the term structure is downward sloping, we find that the
premiums can be significantly negative and are often monotonically
decreasing in maturity. Interestingly, in these periods the volatility
of the term premium is still increasing in maturity, indicating that
bond return volatility is not a priced risk. |
| URI: | http://hdl.handle.net/2451/26964 |
| Appears in Collections: | Finance Working Papers
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