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Ambiguity, nominal bond yields and real bond yields

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Authors and Corporations: Zhao, Guihai (Author)
Type of Resource: E-Book
Language: English
[Ottawa] Bank of Canada [2018]
Series: Bank of Canada: Staff working paper ; 2018, 24 (June 2018)
Source: Verbunddaten SWB
Lizenzfreie Online-Ressourcen
Notes: Zusammenfassung in französischer Sprache
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