An empirical decomposition of risk and liquidity in nominal and inflation-indexed government bonds
By: Carolin E. Pflueger, Luis M. Viceira
Contributors: Viceira, Luis M.; National Bureau of Economic Research
Series: NBER working paper series -- working paper 16892; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16892.
Publisher: National Bureau of Economic Research
Published: 2011
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "This paper decomposes excess return predictability in inflation-indexed and nominal government bonds into liquidity, market segmentation, real interest rate risk and inflation risk.  We estimate a liquidity premium, which appears systematic in nature.  It is around 40 to 70 bps during normal times but much larger during the early years of TIPS and during the financial crisis in 2008-2009.  We find evidence for large time-varying liquidity premia and real rate risk premia in TIPS and a time-varying inflation risk premium in nominal bonds.  We find no evidence for segmentation between nominal and inflation-indexed bond markets in the US or UK"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 6/2/2011.

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