Joint Financial Research Seminar with Kenneth J. Singleton

Learning, Dispersion of Beliefs, and Risk Premiums in an Arbitrage-free Term Structure Model

LFIN, jointly with the National Bank of Belgium and the Belgian universities (KU Leuven, UA, UCL, UGent, ULB, ULg, UMons, UNamur, USaint‑Louis, Vlerick and VUB), is organizing a Joint Financial Research Seminar on June 29, 2017 at 4:30 p.m. The event will be held in the auditorium of the National Bank of Belgium (Rue Montagne aux Herbes potagères 61, Brussels).

Kenneth J. Singleton

Kenneth J. Singleton  is a leading figure in empirical financial economics, and a faculty member at Stanford University. His recent research in econometric methods for estimation and testing of dynamic asset pricing models has been highly influential in academic circles. He is a Member of the Consortium on Financial Systems and Poverty. His professional awards include the Smith Breeden Distinguished Paper Prize from the Journal of Finance, the Frisch Medal from the Econometric Society and the Irving Fisher Dissertation Award. He was named fellow of the Econometric Society in 1988 and of the Journal of Econometrics in 1998, and has been a research associate at the National Bureau of Economic Research since 1982. From 2012 to 2016 he was the editor-in-chief of the Journal of Finance.

Abstract

We model a Bayesian learner who updates beliefs about risk premiums in the US Treasury market using a dynamic term structure model that conditions on belief dispersion. Learning has a significant effect on measured risk premiums. This is true even though she infers the pricing distribution from the current yield curve. Our real-time learning rule substantially outperforms the consensus forecasts of market professionals over the past twenty-five years, particularly during the years following recessions in the U.S. economy. The predictive power of dispersion in beliefs for future yields appears to be largely distinct from that of inflation and output growth.

Registration

Registration and appointments with the speaker should be done by email with nbbfinancial.seminar@nbb.be before June 28. If you want to access the NBB Parking (rue Montagne aux Herbes potagères 41), please mention your name and the license plate of your car.