NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Term Structures of Asset Prices and Returns

David Backus, Nina Boyarchenko, Mikhail Chernov

NBER Working Paper No. 22162
Issued in April 2016, Revised in September 2017
NBER Program(s):   AP

We explore the term structures of claims to a variety of cash flows, namely, U.S. government bonds (claims to dollars), foreign government bonds (claims to foreign currency), inflation-adjusted bonds (claims to the price index), and equity (claims to future equity indexes or dividends). The average term structures reflect the dynamics of the dollar pricing kernel, cash flow growth, and the interaction between the two. We use an affine model to illustrate how these two components can deliver term structures with a wide range of levels and shapes. Finally, we calibrate a representative agent economy to show that the evidence we document is consistent with the equilibrium models.

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Document Object Identifier (DOI): 10.3386/w22162

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