TY  - BOOK
AU  - Bauer,Michael D.
AU  - Chernov,Mikhail
ED  - National Bureau of Economic Research.
TI  - Interest Rate Skewness and Biased Beliefs
T2  - NBER working paper series
PY  - 2021///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - June 2021; Hardcopy version available to institutional subscribers
N2  - Conditional yield skewness is an important summary statistic of the state of the economy. It exhibits pronounced variation over the business cycle and with the stance of monetary policy, and a tight relationship with the slope of the yield curve. Most importantly, variation in yield skewness has substantial forecasting power for future bond excess returns, high-frequency interest rate changes around FOMC announcements, and consensus survey forecast errors for the ten-year Treasury yield. The COVID pandemic did not disrupt these relations: historically high skewness correctly anticipated the run-up in long-term Treasury yields starting in late 2020. The connection between skewness, survey forecast errors, excess returns, and departures of yields from normality is consistent with a theoretical framework where one of the agents has biased beliefs
UR  - https://www.nber.org/papers/w28954
UR  - http://dx.doi.org/10.3386/w28954
ER  -