Bond risk, bond return volatility, and the term structure of interest rates
In: International journal of forecasting, Band 28, Heft 1, S. 97-117
ISSN: 0169-2070
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In: International journal of forecasting, Band 28, Heft 1, S. 97-117
ISSN: 0169-2070
In: NBER Working Paper No. w24646
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In: Harvard Business School Finance Working Paper No. 17-085
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In: NBER Working Paper No. w16892
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In: NBER Working Paper No. w16903
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In: NBER Working Paper No. w12017
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In: NBER Working Paper No. w11119
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In: American economic review, Band 91, Heft 1, S. 99-127
ISSN: 1944-7981
According to conventional wisdom, long-term bonds are appropriate for conservative long-term investors. This paper develops a model of optimal consumption and portfolio choice for infinite-lived investors with recursive utility who face stochastic interest rates, solves the model using an approximate analytical method, and evaluates conventional wisdom. As risk aversion increases, the myopic component of risky asset demand disappears but the intertemporal hedging component does not. Conservative investors hold assets to hedge the risk that real interest rates will decline. Long-term inflation-indexed bonds are most suitable for this purpose, but nominal bonds may also be used if inflation risk is low. (JEL G12)
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In: NBER Working Paper No. w5857
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In: Journal of political economy, Band 128, Heft 8, S. 3148-3185
ISSN: 1537-534X
In: NBER Working Paper No. w13966
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In: NBER Working Paper No. w12859
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In: NBER Working Paper No. w15014
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