Global Evidence on Unspanned Macro Risks in Dynamic Term Structure Models

64 Pages Posted: 28 May 2021 Last revised: 23 May 2022

See all articles by Michel van der Wel

Michel van der Wel

Erasmus University Rotterdam

Yaoyuan Zhang

HKU Business School

Date Written: May 20, 2022


There are mixed results on whether macro risks are spanned by the yield curve. This paper reviews the major arguments and takes a global perspective to obtain comprehensive evidence. We study a large cross-section of 22 countries, including both developed and emerging markets. Our regression evidence confirms that macro information provides explanatory power for bond excess returns on top of yield factors. This finding is particularly strong in emerging markets. However, from a mechanical perspective, discriminating between spanned and unspanned models when considering in-sample fit and term premium predictions makes no difference.

Keywords: Yield curve, Term structure models, Macro-finance, Unspanned macro risks, International markets

JEL Classification: G12, E43, E44

Suggested Citation

van der Wel, Michel and Zhang, Yaoyuan, Global Evidence on Unspanned Macro Risks in Dynamic Term Structure Models (May 20, 2022). Available at SSRN: or

Michel Van der Wel

Erasmus University Rotterdam ( email )

Burg. Oudlaan 50
Rotterdam, NL 3062 PA

Yaoyuan Zhang (Contact Author)

HKU Business School ( email )

Pokfulam Road
Hong Kong, Pokfulam HK

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