The Yield Spread and Bond Return Predictability in Expansions and Recessions-Reference-Cited by-同舟云学术

The Yield Spread and Bond Return Predictability in Expansions and Recessions

Published:2020-09-08 Issue:6 Volume:34 Page:2773-2812
ISSN:0893-9454
Container-title:The Review of Financial Studies
language:en
Short-container-title:

Author:

Andreasen Martin M¹,Engsted Tom²,Møller Stig V¹,Sander Magnus³

Affiliation:

1. CREATES, Aarhus University, and the Danish Finance Institute

2. CREATES, Aarhus University

3. Norges Bank Investment Management

Abstract

Abstract This paper uncovers that expected excess bond returns display a positive correlation with the slope of the yield curve (i.e., yield spread) in expansions but a negative correlation in recessions. We use a macro-finance term structure model with different market prices of risk in expansions and recessions to show that a very accommodating monetary policy in recessions is a key driver of this switch in return predictability.

Publisher

Oxford University Press (OUP)

Subject

Economics and Econometrics,Finance,Accounting

Link

http://academic.oup.com/rfs/advance-article-pdf/doi/10.1093/rfs/hhaa107/34045849/hhaa107.pdf

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