‘Cycle Factor’ Can Predict Returns

Anna Cieslak and Pavol Povala—authors of the paper “Expected Returns in Treasury Bonds,” which was published in the September 2015 issue of The Review of Financial Studies—examined the time variation in the risk premium that investors require for holding Treasury bonds.

While most of the authors’ analysis relies on data starting in 1971 (when data for bond maturities 10 years and longer became available), they also reproduced their main conclusions over the longer sample period from 1952 through 2011 (using maturities of one through five years).

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