EconPapers    
Economics at your fingertips  
 

Macroeconomic Drivers of Bond and Equity Risks

John Campbell (), Carolin Pflueger and Luis Viceira ()

No 20070, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Our new model of consumption-based habit formation preferences generates loglinear, homoskedastic macroeconomic dynamics and time-varying risk premia on bonds and stocks. Consumers' first-order condition for the real risk-free interest rate takes the form of an exactly loglinear consumption Euler equation, commonly assumed in New Keynesian models. Estimating the model separately for 1979-2001 and 2001-2011 explains why the exposure of US Treasury bonds to the stock market changed from positive to negative. A change in the comovement between inflation and the output gap explains changing bond risks, but only when risk premia change endogenously as predicted by the model.

JEL-codes: E43 E44 E52 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
Date: 2014-04
Note: AP EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14) Track citations by RSS feed

Downloads: (external link)
http://www.nber.org/papers/w20070.pdf (application/pdf)

Related works:
Working Paper: Macroeconomic Drivers of Bond and Equity Risks (2018) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:20070

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w20070

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2019-07-20
Handle: RePEc:nbr:nberwo:20070