The Term Structure of Interest Rates: Departures from Time-Separable Expected Utility
AbstractThis paper assesses the ability of general-equilibrium models of asset pricing using two recently developed sets of preferences to account quantitatively for the observed variability in the Canadian term structure of interest rates. The preference structures are nonexpected utility and habit persistence associated with Epstein and Zin (1989) and Constantinides (1990), respectively. The framework adopted follows Backus, Gregory, and Zin (1989), where a numerical version of the theory is specified and empirical features of the artificial economy are compared with actual data. Neither preference structure is able to mimic satisfactorily the magnitude or the variability of the risk premiums.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 24 (1991)
Issue (Month): 4 (November)
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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
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Other versions of this item:
- Allan W. Gregory & Graham M. Voss, 1990. "The Term Structure of Interest Rates: Departures from Time-Separable Expected Utility," Working Papers 794, Queen's University, Department of Economics.
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- Francisco Ruge-Murcia, 2012.
"Skewness Risk and Bond Prices,"
Cahiers de recherche
17-2012, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- René Garcia & Richard Luger, 2009.
"Risk Aversion, Intertemporal Substitution, and the Term Structure of Interest Rates,"
CIRANO Working Papers
- René Garcia & Richard Luger, 2012. "Risk aversion, intertemporal substitution, and the term structure of interest rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(6), pages 1013-1036, 09.
- Balázs Romhányi, 2005. "A learning hypothesis of the term structure of interest rates," Macroeconomics 0503001, EconWPA.
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