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NATIONAL BUREAU OF ECONOMIC RESEARCH
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Michael D. Bauer

Federal Reserve Bank of San Francisco
101 Market Street MS 1130
San Francisco, CA 94105

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Institutional Affiliation: Federal Reserve Bank of San Francisco

NBER Working Papers and Publications

June 2017Robust Bond Risk Premia
with James D. Hamilton: w23480
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.

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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