Interest Term Premiums and C-CAPM: A Test of a Parsimonious Model

Hubert de La Bruslerie and Jessica Fouilloux ()

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Abstract: This paper proposes a consumption-based model that accounts for term premiums of the nominal term structure of interest rates. The driving force behind the model is the looking at the ex ante term premium. Nominal term premiums depend on the volatility processes of real consumption and inflation. When calibrated to US data on interest rates, consumption and inflation, the model accounts for the C-CAPM expectations puzzle. Risk aversion coefficients around 6 are evidenced. The hypothesis of non-constant subjective discount rates is envisaged but successfully validated.

Keywords: C-CAPM; term structure of interest rates; term premium; risk aversion; subjective discount factor (search for similar items in EconPapers)
Date: 2010
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00536924v1
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Related works:
Working Paper: Interest Term Premiums and C-CAPM: A Test of a Parsimonious Model (2015)
Journal Article: Interest Term Premiums and C-CAPM: A Test of a Parsimonious Model (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:halshs-00536924

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