Treasury Bill Yields: Overlooked Information
University of New South Wales (UNSW)
December 9, 2013
This paper finds that bond risk premium consists of long-term and short-term components. The long-term factor raises the slope of yield curve, has forecastability horizon of longer than one year, is related to value, size and momentum premiums in the stock market, and forecasts macroeconomic growth. In contrast, the short-term factor is completely hidden from Treasury bond yields yet apparently reduces Treasury bill yields, has forecastability horizon of less than one quarter, is related to aggregate stock market returns, and is largely attributed to liquidity premium.
Number of Pages in PDF File: 40working papers series
Date posted: August 22, 2011 ; Last revised: December 9, 2013
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