Abstract
We construct and study the cross-sectional properties of survey-based bond risk premia and compare them to their traditional statistical counterparts. We document large heterogeneity in skill, identify top forecasters, and learn about the importance of subjective risk premia in long-term bonds dynamics. The consensus is not a sufficient statistics of the cross-section of expectations and we propose an alternative real-time aggregate measure of risk premia consistent with Friedmans market selection hypothesis. We then use this measure to evaluate structural models and find support for heterogeneous belief economies generating time-varying risk premia via both a quantity and price of risk channel.
Original language | English |
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Publication date | 2017 |
Number of pages | 55 |
Publication status | Published - 2017 |
Event | SFS Cavalcade Asia-Pacific 2017 - PBC School of Finance, Tsinghua University, Beijing, China Duration: 13 Dec 2017 → 15 Dec 2017 http://sfs.org/financecavalcade/2017-sfs-finance-cavalcade-asia-pacific/ |
Conference
Conference | SFS Cavalcade Asia-Pacific 2017 |
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Location | PBC School of Finance, Tsinghua University |
Country/Territory | China |
City | Beijing |
Period | 13/12/2017 → 15/12/2017 |
Internet address |
Keywords
- Cross-section of beliefs
- Bond risk premia
- Expectation formation
- Rational expectations