Multi-level factor analysis of bond risk premia

Dukpa Kim, Yunjung Kim, Yuhyeon Bak

Research output: Contribution to journalArticle

Abstract

Earlier studies in the finance literature show that macroeconomic fundamentals can predict excess bond returns. We employ a multi-level factor model to estimate global and sectoral factors separately and show that (i) the real factors possess most important predictive power existing in the panel; (ii) the financial factors might have some predictive power but less than the real factors; (iii) the inflation factors have almost no predictive power and (iv) the excess bond returns have a countercyclical component.

Original languageEnglish
Article number20150080
JournalStudies in Nonlinear Dynamics and Econometrics
Volume21
Issue number5
DOIs
Publication statusPublished - 2017 Dec 20

Keywords

  • common factors
  • excess bond returns
  • predictive regression

ASJC Scopus subject areas

  • Analysis
  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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