SSRN Author: Andrea BerardiAndrea Berardi SSRN Content
https://privwww.ssrn.com/author=2889239
https://privwww.ssrn.com/rss/en-usFri, 13 Aug 2021 01:00:24 GMTeditor@ssrn.com (Editor)Fri, 13 Aug 2021 01:00:24 GMTwebmaster@ssrn.com (WebMaster)SSRN RSS Generator 1.0REVISION: Dissecting the Yield Curve: The International EvidenceWe develop a term structure model that decomposes nominal yields into the sum of an expectation, term premium, and convexity term, and in turn of their real and inflation counterparts. The model explicitly captures the interrelation between yield factors and macroeconomic conditions while allowing for aggregate stochastic volatility. We extract the components from the nominal and real yield curve of the US, Euro Area, UK, and Japan. We find that the bulk of yield dynamics comes from short rate expectations. Term premia vary over time and increase with maturity, but account for a smaller fraction of yield variance than previously documented. Over time, we observe a sustained decline in short real rate expectations and significant convexity effects. With regard to yield comovement, the US generates the strongest spillovers at the long-end of the yield curve, whereas the Japanese market is the top importer of shocks.
https://privwww.ssrn.com/abstract=3406156
https://privwww.ssrn.com/2050310.htmlThu, 12 Aug 2021 15:15:04 GMTREVISION: Dissecting the Yield Curve: The International EvidenceWe develop a term structure model that decomposes nominal yields into the sum of an expectation, term premium, and convexity term, and in turn of their real and inflation counterparts. The model explicitly captures the interrelation between yield factors and macroeconomic conditions while allowing for aggregate stochastic volatility. We extract the components from the nominal and real yield curve of the US, Euro Area, UK, and Japan. We find that the bulk of yield dynamics comes from short rate expectations. Term premia vary over time and increase with maturity, but account for a smaller fraction of yield variance than previously documented. Over time, we observe a sustained decline in short real rate expectations and significant convexity effects. With regard to yield comovement, the US generates the strongest spillovers at the long-end of the yield curve, whereas the Japanese market is the top importer of shocks.
https://privwww.ssrn.com/abstract=3406156
https://privwww.ssrn.com/2035239.htmlFri, 18 Jun 2021 08:28:14 GMTREVISION: Dissecting the Yield Curve: The International EvidenceWe develop a term structure model that decomposes nominal yields into the sum of an expectation, term premium, and convexity term, and in turn of their real and inflation counterparts. The model explicitly captures the interrelation between yield factors and macroeconomic conditions while allowing for aggregate stochastic volatility. We extract the components from the nominal and real yield curve of the US, Euro Area, UK, and Japan. We find that the bulk of yield dynamics comes from short rate expectations. Term premia vary over time and increase with maturity, but account for a smaller fraction of yield variance than previously documented. Over time, we observe a sustained decline in short real rate expectations and significant convexity effects. With regard to yield comovement, the US generates the strongest spillovers at the long-end of the yield curve, whereas the Japanese market is the top importer of shocks.
https://privwww.ssrn.com/abstract=3406156
https://privwww.ssrn.com/2006801.htmlWed, 24 Mar 2021 11:55:29 GMTREVISION: Inflation Risk Premia, Yield Volatility and Macro FactorsWe incorporate a latent stochastic volatility factor and macroeconomic expectations in an affine model for the term structure of nominal and real rates. We estimate the model over 1999-2016 on U.S. data for nominal and TIPS yields, the realized and implied volatility of T-bonds and survey forecasts of GDP growth and inflation. We find relatively stable inflation risk premia averaging at 40bps at the long-end, and which are strongly related to the volatility factor and conditional mean of output growth. We also document real risk premia that turn negative in the post-crisis period, and a non-negligible variance risk premium.
https://privwww.ssrn.com/abstract=3106878
https://privwww.ssrn.com/1998565.htmlFri, 05 Mar 2021 09:41:09 GMTREVISION: Mind the (Convergence) Gap: Bond Predictability Strikes Back!We show that the difference between the natural rate of interest and the current level of monetary policy stance, which we label Convergence Gap (CG), contains information that is valuable for bond predictability. Adding CG in forecasting regressions of bond excess returns significantly raises the R-squared, and restores countercyclical variation in bond risk premia that is otherwise missed by forward rates. Consistent with the argument that CG captures the effect of real imbalances on the path of rates, our factor has predictive ability for real bond excess returns. The importance of the gap remains robust out-of-sample and in countries other than the U.S. Furthermore, its inclusion brings significant economic gains in the context of dynamic conditional asset allocation.
https://privwww.ssrn.com/abstract=2023885
https://privwww.ssrn.com/1998563.htmlFri, 05 Mar 2021 09:40:39 GMTNew: Bond Risk Premia: The Information in Really Long-Maturity Forward RatesLong term forward rates contain information that greatly improves the precision with which expectations of future short rates can be distinguished from risk premia in the term structure. Indeed, in affine models, the slope of the term structure of risk premia for long maturities is very closely approximated by the sum of (i) the slope of the forward rate curve and (ii) a term that depends only of yield volatility and maturity ("convexity"), two quantities that can easily be estimated independently of the details of model specification. Key to extracting the risk premium information in long-term forward rates is capturing the dynamics of convexity, which requires a model with time-varying volatility. Using a four-factor ATSM, we find that risk premia on long term bonds are almost entirely driven by volatility. Short rate expectations in our model account for a much larger fraction of the volatility of yields than is typically reported, a result that we show is mainly the result of ...
https://privwww.ssrn.com/abstract=3778178
https://privwww.ssrn.com/1993937.htmlMon, 22 Feb 2021 16:10:27 GMTREVISION: Dissecting the Yield Curve: The International EvidenceNominal yields can be expressed as the sum of an expectation, term premium, and convexity component, and in turn of their real and inflation counterparts. We extract these terms from the yield curve of the U.S., Euro Area, U.K., and Japan using a term structure model that explicitly captures the interrelation between yield factors and macroeconomic conditions while allowing for aggregate stochastic volatility. We find that the bulk of yield dynamics comes from short rate expectations. Term premia vary over time and increase with maturity, but account for a smaller fraction of yield level and variance than previously documented. Over time, we observe a sustained decline in short real rate expectations and significant convexity effects. With regard to yield comovement, the U.S. and U.K. generate the strongest spillovers at the long-end of the yield curve, in particular through term premia, whereas the Japanese market is the least connected.
https://privwww.ssrn.com/abstract=3406156
https://privwww.ssrn.com/1947956.htmlMon, 05 Oct 2020 15:26:24 GMTREVISION: Mind the (Convergence) Gap: Bond Predictability Strikes Back!We show that the difference between the natural rate of interest and the current level of monetary policy stance, which we label Convergence Gap (CG), contains information that is valuable for bond predictability. Adding CG in forecasting regressions of bond excess returns significantly raises the R-squared, and restores countercyclical variation in bond risk premia that is otherwise missed by forward rates. Consistent with the argument that CG captures the effect of real imbalances on the path of rates, our factor has predictive ability for real bond excess returns. The importance of the gap remains robust out-of-sample and in countries other than the U.S. Furthermore, its inclusion brings significant economic gains in the context of dynamic conditional asset allocation.
https://privwww.ssrn.com/abstract=2023885
https://privwww.ssrn.com/1932313.htmlMon, 17 Aug 2020 08:31:58 GMT