The Inflation-Indexed Bond Puzzle

摘要: This paper presents new insights into the dynamics and determinants of arbitrage mispricing in across seven world’s largest most liquid financial markets. Specifically, this analyzes between nominal inflation-linked bonds (ILB mispricing) G7 government bond markets, extends slow moving capital explanation persistence Nominal are “richer” than cash-flow matched on average. The is stunning magnitude: aggregate excess $22 billion average during period from July 2004 to September 2011. In aftermath 2008 crisis, it peaks at $101 which represents more eight percent total size Furthermore, index-linked trade generates positively-skewed risk-adjusted returns all countries. key insight for slow-moving theory that available specific types arbitrageurs significantly related mispricing. hedge funds following fixed income strategies strongly predict subsequent changes ILB mispricing, whereas other fund categories lack statistically significant forecasting power. also effects monetary policy central banks around world may have exacerbated through large-scale asset purchase programs.