The 12th Frontier Forum for Digital Technology and Finance

Abstract：

Beliefs on the current economic state wag the economy and have persistent　macro outcomes. We construct a single current economic condition indicator (CEC)　and find that it strongly predicts bond returns with out-of-sample R-square up to 35% and is unspanned by the yield curve. Notably, the CEC's predictive power is complementary to long-term macro trends, suggesting that the entire term structure of macroeconomic expectations is important for understanding risk premiums. We propose a term structure model upon imperfect information to illustrate the role of CEC. Indeed, it can account for countercyclical risk premiums and is superior in interest rate forecasts.

Speaker Introduction：

Xiaoneng Zhu, Professor and doctoral supervisor of the School of Finance, Shanghai University of Finance and Economics. He is also the researcher of the Shanghai Institute of International Finance and Economics. His research interests include asset pricing, financial markets and macroeconomics, finTech, monetary policy, etc. In recent years, He has published more than 30 papers in International authoritative journals such as the Journal of Financial Economics, Management Science, Journal of Financial and Quantitative Analysis, Review of Finance. He also has published more than 10 papers in domestic authoritative journals such as Economic Research, Financial Research, Quarterly Journal of Economics, and Journal of Management Science.