Macro‐finance VARs and bond risk premia: A caveat

Marco Taboga

Review of Financial Economics, 2009, vol. 18, issue 4, 163-171

Abstract: At the turn of the century, US and euro area long‐term bond yields experienced a remarkable decline and remained at historically low levels despite rising short‐term rates (the so called “conundrum”). Estimating macro‐finance VARs and no‐arbitrage term structure models, many researchers find that the decline in long‐term rates was primarily driven by an unprecedented reduction in risk premia. I show that this result might be an artefact of the class of models employed to study the phenomenon.

Date: 2009
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https://doi.org/10.1016/j.rfe.2009.06.002

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Journal Article: Macro-finance VARs and bond risk premia: A caveat (2009)
Working Paper: Macro-finance VARs and bond risk premia: a caveat (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:revfec:v:18:y:2009:i:4:p:163-171

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