Bond Risk Premia in Consumption-based Models | E-Axes

Not a member yet? Click here.
Forgot your Password?
Archives - Categories
On Inequality
On the Eurozone Debt Crisis
On Monetary Policy and Central Banking
On Global Economic Growth
On the Greek Debt Crisis
On the Banking and Financial Sectors
On Brexit
On China
On India
On Global Inflation
On Currencies
On the US Debt
On the "Economics" of the Arab Spring
Working Papers
Books suggested by members

Bond Risk Premia in Consumption-based Models

date Date: April 2, 2015
date Author(s): Drew D. Creal, Jing Cynthia Wu
date Affiliation: University of Chicago

The literature on recursive preference attributes all the time variation in bond risk premia to stochastic volatility. We introduce another source: time-varying prices of risk that co-move with inflation and consumption growth through a preference shock. We find that a time-varying price of risk driven by inflation dominates stochastic volatility in contributing to time variation in term premia. Once preference shocks are present, term premia are economically the same with or without stochastic volatility.


© 2011–2017 e-axes. All rights reserved. | Credits | Contact Us | Privacy Statement | Sat 20 Jan, 2018 01:36:43 AM
e-axes is proudly powered by Norder - Creative Solutions