Unspanned Global Macro Risks in Bond Returns

Feng Zhao (), Guofu Zhou () and Xiaoneng Zhu ()
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Feng Zhao: Jindal School of Management, University of Texas at Dallas, Richardson, Texas 75080
Guofu Zhou: Olin School of Business, St. Louis, Missouri 63130
Xiaoneng Zhu: School of Finance, Shanghai University of Finance and Economics and Shanghai Institute of International Finance and Economics, Shanghai 200433, China

Management Science, 2021, vol. 67, issue 12, 7825-7843

Abstract: We examine the macro-spanning hypothesis for bond returns in international markets. Based on a large panel of real-time macroeconomic variables that are not subject to revisions, we find that global macro factors have predictive power for bond returns unspanned by yield factors. Furthermore, we estimate macro-finance term structure models with the unspanned global macro factors and find that the global macro factors influence the market prices of level and slope risks and induce comovements in forward term premia in global bond markets.

Keywords: bond risk premia; global economic factors; real-time macroeconomic factors; macro-finance term structure models; macro-spanning puzzle (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:67:y:2021:i:12:p:7825-7843

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