Rationality and Subjective Bond Risk Premia

Andrea Buraschi, Ilaria Piatti, Paul Whelan

Research output: Contribution to conferencePaperResearchpeer-review

Abstract

We construct and study the cross-sectional properties of survey-based bond risk premia and compare them to 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. Next, we propose a new real-time aggregate measure of bond risk premia consistent with Friedman’s market selection hypothesis. Finally, we use this measure to evaluate behavioural versus rational explanations of subjective risk premia and find support for models that include both sentiment and time-varying quantity of risk channels.
Original languageEnglish
Publication date2018
Number of pages65
Publication statusPublished - 2018
EventSFS Cavalcade North America 2018 - Yale University, New Haven, United States
Duration: 21 May 201824 May 2018
http://sfs.org/financecavalcades/2018-sfs-finance-cavalcade/

Conference

ConferenceSFS Cavalcade North America 2018
LocationYale University
Country/TerritoryUnited States
CityNew Haven
Period21/05/201824/05/2018
Internet address

Keywords

  • Rational expectations
  • Beliefs
  • Bond risk premia

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