Adjusting Futures Forecasts of Federal Reserve Policy: Risk-Premia or Expectational Errors?

Albert Lee Chun, Olfa Maalaoui Chun

Publikation: KonferencebidragPaperForskningpeer review

Abstrakt

Our results challenge the traditional way we interpret empirical measures of risk premia, as a signicant part of the predictable component of excess returns is strongly correlated with predictability in survey forecast errors. Using survey forecasts of the federal funds rate to proxy for market expectations, we show that the predictable component of excess returns can not be attributed to risk premia in the fed funds futures market. We argue that the documented biases in futures forecasts of monetary policy, which were previously characterized as risk premia (Piazzesi and Swanson, 2008), are driven primarily by expectational errors.
OriginalsprogEngelsk
Publikationsdato2013
Antal sider12
StatusUdgivet - 2013
BegivenhedEuropean Economic Association & Econometric Society 2013 Parallel Meetings - Gothenburg, Sverige
Varighed: 26 aug. 201330 aug. 2013
http://www.eea-esem.com/eea-esem/2013/

Konference

KonferenceEuropean Economic Association & Econometric Society 2013 Parallel Meetings
Land/OmrådeSverige
ByGothenburg
Periode26/08/201330/08/2013
Internetadresse

Emneord

  • Fed funds futures forecast
  • Monetary policy
  • Blue chip financial forecasts
  • Risk premia
  • Predictable excess returns
  • Expectational errors

Citationsformater