Interest Term Premiums and C-CAPM: A Test of a Parsimonious Model

Hubert de La Bruslerie (1) , Jessica Fouilloux (2)

1 DRM - Dauphine Recherches en Management
2 CREM - Centre de recherche en économie et management

This paper proposes a consumption-based model that accounts for term premiums of the nominal term structure of interest rates. The driving force behind the model is the looking at the ex ante term premium. Nominal term premiums depend on the volatility processes of real consumption and inflation. When calibrated to US data on interest rates, consumption and inflation, the model accounts for the C-CAPM expectations puzzle. Risk aversion coefficients around 6 are evidenced. The hypothesis of non-constant subjective discount rates is envisaged but successfully validated.

Mots clés: C-CAPM; term structure of interest rates; term premium; risk aversion; subjective discount factor

Domaines: Gestion et management

Hubert de La Bruslerie, Jessica Fouilloux. Interest Term Premiums and C-CAPM: A Test of a Parsimonious Model. 2010. ⟨halshs-00536924⟩