Robust Bond Risk Premia

Michael Bauer and James Hamilton

No 23480, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A consensus has recently emerged that variables beyond the level, slope, and curvature of the yield curve can help predict bond returns. This paper shows that the statistical tests underlying this evidence are subject to serious small-sample distortions. We propose more robust tests, including a novel bootstrap procedure specifically designed to test the spanning hypothesis. We revisit the analysis in six published studies and find that the evidence against the spanning hypothesis is much weaker than it originally appeared. Our results pose a serious challenge to the prevailing consensus.

JEL-codes: C1 G12 (search for similar items in EconPapers)
Date: 2017-06
Note: AP EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Published as Michael D. Bauer & James D. Hamilton, 2018. "Robust Bond Risk Premia," The Review of Financial Studies, vol 31(2), pages 399-448.

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Related works:
Journal Article: Robust Bond Risk Premia (2018)
Working Paper: Robust Bond Risk Premia (2015)
Working Paper: Robust bond risk premia (2015)
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