Risk Premium Information from Treasury Bill Yields
University of New South Wales (UNSW)
April 24, 2015
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, and is related to value, size and momentum premiums in the stock market. In contrast, the short-term factor affects Treasury bill yields but has very little effects on Treasury bonds, has forecastability horizon of less than one quarter, is related to aggregate stock market returns, and is attributed to liquidity premium.
Number of Pages in PDF File: 50
Date posted: August 22, 2011 ; Last revised: April 27, 2015
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