Speculation, Hedging, and Interest Rates

Andrea Buraschi, Paul Whelan

Publikation: KonferencebidragPaperForskningpeer review

Abstrakt

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.
OriginalsprogEngelsk
Publikationsdato2016
Antal sider58
StatusUdgivet - 2016
BegivenhedThe 43rd European Finance Association Annual Meeting (EFA 2016) - BI Norwegian Business School, Oslo, Norge
Varighed: 17 aug. 201620 aug. 2016
Konferencens nummer: 43
http://www.efa2016.org/

Konference

KonferenceThe 43rd European Finance Association Annual Meeting (EFA 2016)
Nummer43
LokationBI Norwegian Business School
LandNorge
ByOslo
Periode17/08/201620/08/2016
Internetadresse

Emneord

  • Fixed income
  • Bond risk premia
  • Heterogeneous agents
  • Speculation

Citationsformater

Buraschi, A., & Whelan, P. (2016). Speculation, Hedging, and Interest Rates. Afhandling præsenteret på The 43rd European Finance Association Annual Meeting (EFA 2016), Oslo, Norge.