But we do not understand why, and consequently we do not know to what extent we are seeing a permanent decline in the term premium – perhaps due to a general reduction in the volatility of economic activity and inflation over the past twenty-five years.
Or we may be seeing a temporary decline due to the influence of recent macroeconomic conditions or special factors affecting the demand for long-term bonds. In addition to these well-known puzzles, are also a large number of puzzles across all asset markets that I will group under the common theme of risk harmonization.