fbpx Return Predictability in the Treasury Market: Real Rates, Inflation, and Liquidity | Harvard Kennedy School

Additional Authors:

  • Luis Viceira

Excerpt

Return Predictability in the Treasury Market: Real Rates, Inflation, and Liquidity. Luis M. Viceira, September 27, 2013, Paper. "Estimating the liquidity differential between inflation-indexed and nominal bond yields, we separately test for time-varying real rate risk premia, inflation risk premia, and liquidity premia in U.S. and U.K. bond markets. We find strong, model independent evidence that real rate risk premia and inflation risk premia contribute to nominal bond excess return predictability to quantitatively similar degrees. The estimated liquidity premium between U.S. inflation-indexed and nominal yields is systematic..." Link