Working Papers

Ambiguity, Nominal Bond Yields, and Real Bond Yields,2018

Abstract: The literature relies on inflation non-neutrality to generate upward sloping nominal yield curves. We develop a model that can generate upward sloping nominal and real yield curves without relying on inflation non-neutrality, but instead using ambiguity about inflation and growth to produce this result. This can help resolve the puzzling fact that upward sloping yield curves have persisted despite positive inflation shocks becoming good news for future growth in the post 1990s period. Expectations hypothesis roughly holds under the worst case belief. Bond return predictability is due to the difference between the worst case and the reference distribution. The model is also consistent with the recent empirical findings on the term structure of equity returns.


Confidence, Bond Risks, and Equity Returns, Journal of Financial Economics. 2017

Work in Progress

“Learning from Monetary Shocks and Asset Returns” (joint with Simon Gilchrist), November 2015