Modelling the Yield Curve
AbstractWe test and estimate a variety of alternative models of the yield curve, using weekly, high-quality U.K. data. We extend the Campbell-Shiller technique to the overlapping data case and apply it to reject the pure expectations hypothesis under rational expectations. We also find that risk measures, in the form of conditional interest rate volatility, are unable to explain the term premium. A simple, market segmentation approach is, however, moderately successful in explaining the term premium.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 91/134.
Date of creation: 01 Dec 1991
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