Speculation, Hedging, and Interest Rates

Andrea Buraschi; Paul Whelan

Speculation, Hedging, and Interest Rates

Andrea Buraschi, Paul Whelan

Institut for Finansiering

Imperial College London

Publikation: Konferencebidrag › Paper › Forskning › peer review

Abstract

We study the properties of bonds in an economy with risk tolerant agents who arerationally induced to trade because they believe in different models for the dynamicsof the economy. We show analytically that low risk aversion coupled with differencesin beliefs can help rationalise several features of Treasury bond markets that the singleagent paradigm finds difficult to reconcile. Empirically, we test predictions from themodel using a large dataset on beliefs about fundamentals and find that: (i) shocksto disagreement lower short term interest rates; (ii) raise the slope of the yield curve;and (iii) predict expected excess bond returns.

Originalsprog	Engelsk
Publikationsdato	2016
Antal sider	58
Status	Udgivet - 2016
Begivenhed	The 43rd European Finance Association Annual Meeting (EFA 2016) - BI Norwegian Business School, Oslo, Norge Varighed: 17 aug. 2016 → 20 aug. 2016 Konferencens nummer: 43 http://www.efa2016.org/

Konference

Konference	The 43rd European Finance Association Annual Meeting (EFA 2016)
Nummer	43
Lokation	BI Norwegian Business School
Land/Område	Norge
By	Oslo
Periode	17/08/2016 → 20/08/2016
Internetadresse	http://www.efa2016.org/

Emneord

Fixed income
Bond risk premia
Heterogeneous agents
Speculation

Adgang til dokumentet

https://www.conftool.com/efa2016/index.php/EFA2016-1634-APE-02-Whelan-Speculation%2C_Hedging%2C_and_Interest_Rates.pdf?page=downloadPaper&filename=EFA2016-1634-APE-02-Whelan-Speculation%2C_Hedging%2C_and_Interest_Rates.pdf&form_id=1634&form_version=finalLicens: Ikke-specificeret

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Citationsformater

Buraschi, A., & Whelan, P. (2016). Speculation, Hedging, and Interest Rates. Paper præsenteret på The 43rd European Finance Association Annual Meeting (EFA 2016), Oslo, Norge. https://www.conftool.com/efa2016/index.php/EFA2016-1634-APE-02-Whelan-Speculation%2C_Hedging%2C_and_Interest_Rates.pdf?page=downloadPaper&filename=EFA2016-1634-APE-02-Whelan-Speculation%2C_Hedging%2C_and_Interest_Rates.pdf&form_id=1634&form_version=final

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keywords = "Fixed income, Bond risk premia, Heterogeneous agents, Speculation, Fixed income, Bond Risk Premia, Heterogeneous Agents, Speculation",

author = "Andrea Buraschi and Paul Whelan",

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Buraschi, A & Whelan, P 2016, 'Speculation, Hedging, and Interest Rates', Paper fremlagt ved The 43rd European Finance Association Annual Meeting (EFA 2016), Oslo, Norge, 17/08/2016 - 20/08/2016. <https://www.conftool.com/efa2016/index.php/EFA2016-1634-APE-02-Whelan-Speculation%2C_Hedging%2C_and_Interest_Rates.pdf?page=downloadPaper&filename=EFA2016-1634-APE-02-Whelan-Speculation%2C_Hedging%2C_and_Interest_Rates.pdf&form_id=1634&form_version=final>

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AU - Buraschi, Andrea

AU - Whelan, Paul

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AB - We study the properties of bonds in an economy with risk tolerant agents who arerationally induced to trade because they believe in different models for the dynamicsof the economy. We show analytically that low risk aversion coupled with differencesin beliefs can help rationalise several features of Treasury bond markets that the singleagent paradigm finds difficult to reconcile. Empirically, we test predictions from themodel using a large dataset on beliefs about fundamentals and find that: (i) shocksto disagreement lower short term interest rates; (ii) raise the slope of the yield curve;and (iii) predict expected excess bond returns.

KW - Fixed income

KW - Bond risk premia

KW - Heterogeneous agents

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KW - Bond Risk Premia

KW - Heterogeneous Agents

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