Finance Papers

Author(s)

Martin D. D. Evans

Document Type

Journal Article

Date of this Version

4-1994

Publication Source

Journal of Monetary Economics

Volume

33

Issue

2

Start Page

285

Last Page

318

DOI

10.1016/0304-3932(94)90004-3

Abstract

Predictable variations in excess returns have often been attributed to the presence of time-varying risk premia. In this paper, we use an insight based upon new techniques from time series analysis to test whether stationary risk premia can alone explain the behavior of excess returns to long bonds relative to rolling over short rates. Surprisingly, we reject this hypothesis using U.S. T-bill returns. We then show that either permanent shocks to the risk premia and/or rationally anticipated shifts in the interest rate process could produce anomalous results.

Copyright/Permission Statement

© 1994. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/

Keywords

Interest rates, financial markets

Embargo Date

3-12-2004

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Date Posted: 27 November 2017

This document has been peer reviewed.