Working paper 229 views
Macroeconomic cycles and bond return predictability
Stefano Soccorsi 
,
Katerina Tsakou
,
Katerina Tsakou
Swansea University Author:
Katerina Tsakou
Abstract
We study the link between the macroeconomy and expected bond returns by dissecting common macroeconomic cycles of different lengths. Two unobservable predictors generate sizeable economic value for investors: an inflation factor maximizing macroeconomic cycles of at least 8 years, and a term spread...
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| URI: | https://cronfa.swan.ac.uk/Record/cronfa67869 |
| Abstract: |
We study the link between the macroeconomy and expected bond returns by dissecting common macroeconomic cycles of different lengths. Two unobservable predictors generate sizeable economic value for investors: an inflation factor maximizing macroeconomic cycles of at least 8 years, and a term spread factor maximizing cycles of 1 to 3 years. The inflation factor captures the stance of monetary policy as return premia increase when the policy rule becomes “hawkish”. The term spread factor reflects investors’ perception of business-cycle risk. |
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| College: |
Faculty of Humanities and Social Sciences |