The Financial Econometrics Seminar: 
Time: 11:30 pm
Date: 15th of December 2022
Room 3001

Guillaume ROUSSELLET (Mcgill University) “What do Bond Investors Learn from Macroeconomic News?”

Abstract : Macroeconomic data releases drive US bond yields primarily through the term premium instead of the expectation channel. The evidence exploits a monthly specification for yields embedding the impacts of news identified from high-frequency data. To match the facts, we develop and calibrate a no-arbitrage model where investors use data releases with imperfect information to learn about future monetary policy. If macro news carry perfect information, the model predicts that the bonds’ Sharpe ratio decreases and the term premium declines by half for every maturity, suggesting that central bank’s communication can lower the term premium and financing costs across the economy.

Organizers:

Jean-Michel ZAKOIAN  (CREST)

Sponsors:
CREST