Ambiguity, nominal bond yields and real bond yields

Saved in:

Authors and Corporations:

Zhao, Guihai (Author)

Type of Resource:

E-Book

Language:

English

published:

[Ottawa] Bank of Canada [2018]

Series:

Subjects:

Asset pricing

Financial markets

Interest rates

Graue Literatur

Source:

Verbunddaten SWB
Lizenzfreie Online-Ressourcen

Notes:

Zusammenfassung in französischer Sprache

Description
Summary:	Equilibrium bond-pricing models rely on inflation being bad news for future growth to generate upward-sloping nominal yield curves. We develop a model that can generate upward-sloping nominal and real yield curves by instead using ambiguity about inflation and growth. Ambiguity can help resolve the puzzling fact that upward-sloping yield curves have persisted despite positive inflation shocks changing from negative to positive news about growth in the last twenty years. Investors make decisions using worst-case beliefs, under which the expectations hypothesis roughly holds. However, inflation and growth evolve over time under the true distribution, and this difference makes excess returns on long-term bonds predictable. The model is also consistent with the recent empirical findings on the term structure of equity returns.
Physical Description:	1 Online-Ressource (circa 48 Seiten); Illustrationen
Notes:	Zusammenfassung in französischer Sprache