Simple models of time-varying risk premia are used to measure the risk premia in long-term UK government bonds. The parameters of the models can be estimated using nonlinear seemingly unrelated regression (NL-SUR), which permits efficient use of information across the entire yield curve and facilitates the testing of various cross-sectional restrictions. The estimated time-varying premia are found to be substantially different to those estimated using models that assume constant risk premia. © 2004 Taylor and Francis Ltd.
- time-varying risk premi
- risk premia
- long-term UK government bonds
- nonlinear seemingly unrelated regression
- yield curve
- cross-sectional restrictions