ffine property, we compute the nominal and inflation-indexed bond prices explicitly. We derive no-arbitrage drift conditions … for the factor process. Then, we perform a novel hedging analysis where our objective is to replicate an indexed bond of a … U.S. bond data and perform an in-sample hedging analysis. Having relatively small in-sample hedging errors, we validate …

show that it can jointly account for a high mean value of bond and equity premium without compromising the fit of the model …

Cochrane and Piazzesi (2005) show that (i) lagged forward rates improve the predictability of annual bond returns …

Bond excess returns can be predicted by macro factors, however, large parts remain still unexplained. We apply a novel … term structure model to decompose bond excess returns into expected excess returns (risk premia) and the unexpected part … possible determinants of bond excess returns. We find that the expected part of bond excess returns is driven by macro factors …

Equilibrium bond-pricing models rely on inflation being bad news for future growth to generate upward-sloping nominal …