Treasury Bill Yields: Overlooked Information
University of New South Wales (UNSW)
March 21, 2014
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 affects Treasury bill yields but is hidden from 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: 47working papers series
Date posted: August 22, 2011 ; Last revised: May 21, 2014
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