TY  - UNPD
A1  - Bauer, Michael
A1  - Chernov, Mikhail
T1  - IMFS interest rate skewness and biased beliefs
T2  - Working paper series / Institute for Monetary and Financial Stability ; 163
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.
T3  - Working paper series / Institute for Monetary and Financial Stability - 163 
KW  - bond markets
KW  - yield curve
KW  - skewness
KW  - biased beliefs
KW  - monetary policy
Y1  - 2021
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/61776
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-617766
UR  - https://www.imfs-frankfurt.de/de/forschung/imfs-working-papers/details/publication/interest-rate-skewness-and-biased-beliefs.html
IS  - First draft: January 2021 ; This draft: June 16, 2021
PB  - Johann Wolfgang Goethe-Univ., Inst. for Monetary and Financial Stability
CY  - Frankfurt am Main
ER  -