Bond Positions, Expectations, and the Yield Curve

49 Pages Posted: 16 Mar 2015

See all articles by Monika Piazzesi

Monika Piazzesi

Stanford University; University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Martin Schneider

Stanford University

Date Written: January 2008

Abstract

This paper implements a structural model of the yield curve with data on nominal positions and survey forecasts. Bond prices are characterized in terms of investors' current portfolio holdings as well as their subjective beliefs about future bond payoffs. Risk premia measured by an econometrician vary because of changes in investors' subjective risk premia that are identified from portfolios and subjective beliefs but also because subjective beliefs differ from those of the econometrician. The main result is that investors' systematic forecast errors are an important source of business cycle variation in measured risk premia. By contrast, subjective risk premia move less and more slowly over time.

Keywords: expectations, surveys, interest rates, portfolio choice, asset positions, term structure, yield curve

JEL Classification: E04, E05, G01

Suggested Citation

Piazzesi, Monika and Schneider, Martin, Bond Positions, Expectations, and the Yield Curve (January 2008). FRB Atlanta Working Paper No. 2008-2, Available at SSRN: https://ssrn.com/abstract=2482363 or http://dx.doi.org/10.2139/ssrn.2482363

Monika Piazzesi (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-3199 (Phone)
773-702-0458 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Martin Schneider

Stanford University ( email )

Stanford, CA 94305
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
157
Abstract Views
1,147
Rank
339,776
PlumX Metrics