Abstract

http://ssrn.com/abstract=1709636
 
 

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Expected Returns in Treasury Bonds


Anna Cieslak


Northwestern University - Kellogg School of Management

Pavol Povala


Birkbeck, University of London

August 10, 2013


Abstract:     
We decompose Treasury yields into long-horizon inflation expectations and maturity related cycles. Cycles combine the risk premium and the business cycle variation in short rate expectations. From cycles, we construct a measure of expected bond returns. The risk premium factor varies at a frequency higher than the business cycle, and predicts excess bond returns in- and out-of sample. The decomposition captures in a parsimonious way the predictable element of bond returns usually measured with a linear combination of forward rates.

Number of Pages in PDF File: 66

Keywords: term premia, bond return forecasting factor

JEL Classification: E32, E44, G12

working papers series


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Date posted: November 15, 2010 ; Last revised: August 28, 2013

Suggested Citation

Cieslak, Anna and Povala, Pavol, Expected Returns in Treasury Bonds (August 10, 2013). Available at SSRN: http://ssrn.com/abstract=1709636 or http://dx.doi.org/10.2139/ssrn.1709636

Contact Information

Anna Cieslak (Contact Author)
Northwestern University - Kellogg School of Management ( email )
2001 Sheridan Road
Evanston, IL 60208
United States
Pavol Povala
Birkbeck, University of London ( email )
Malet Street
Bloomsbury
London, WC1E 7HX
United Kingdom
+44 (0) 20 7631 6486 (Phone)
HOME PAGE: http://www.ems.bbk.ac.uk/faculty/povala
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