Data and Code for: Ambiguity, Nominal Bond Yields, and Real Bond Yields

Principal Investigator(s):  View help for Principal Investigator(s) Guihai Zhao, Bank of Canada

Version:  View help for Version V1

Name File Type Size Last Modified
ABYields_Main.m text/x-objcsrc 12.9 KB 09/03/2019 07:53:AM
CPI_GDP_Quarterly.xlsx application/vnd.openxmlformats-officedocument.spreadsheetml.sheet 13.3 KB 09/03/2019 07:53:AM
Nominal_Yields.xlsx application/vnd.openxmlformats-officedocument.spreadsheetml.sheet 33.9 KB 10/02/2019 09:13:AM
README.pdf application/pdf 707.5 KB 11/07/2019 07:12:AM
REG_NW_mv2.m text/x-matlab 551 bytes 08/30/2019 10:15:AM
REG_NW_mv6.m text/x-matlab 551 bytes 06/15/2014 12:05:PM
SimulationTS.m text/x-matlab 10.9 KB 06/15/2014 02:24:PM
TIPS_Yields.xlsx application/vnd.openxmlformats-officedocument.spreadsheetml.sheet 11.3 KB 08/30/2019 09:15:AM

Project Citation: 

Zhao, Guihai. Data and Code for: Ambiguity, Nominal Bond Yields, and Real Bond Yields. Nashville, TN: American Economic Association [publisher], 2020. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2020-05-28. https://doi.org/10.3886/E111685V1

Project Description

Summary:  View help for Summary This paper presents an equilibrium bond-pricing model that jointly explains the upward-sloping nominal and real yield curves and the violation of the expectations hypothesis. Instead of relying on the inflation risk premium, the ambiguity-averse agent faces different amounts of Knightian uncertainty in the long run versus the short run; hence the model-implied nominal and real short rate expectations are upward-sloping under the agent's worst-case equilibrium beliefs. The expectations hypothesis roughly holds under investors' worst-case beliefs. The difference between the worst-case scenario and the true distribution makes realized excess returns on long-term bonds predictable.

Scope of Project

JEL Classification:  View help for JEL Classification
      E43 Interest Rates: Determination, Term Structure, and Effects
      G00 General
      G12 Asset Pricing • Trading Volume • Bond Interest Rates
      E43


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V1 [2020-05-28]

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