NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Robust Bond Risk Premia

Michael D. Bauer, James D. Hamilton

NBER Working Paper No. 23480
Issued in June 2017
NBER Program(s):Asset Pricing Program, Economic Fluctuations and Growth Program, Monetary Economics Program

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.

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Document Object Identifier (DOI): 10.3386/w23480

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

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