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The Term Structure of Interest Rates

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Author Info
Robert J. Shiller
J. Huston McCulloch

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Abstract

This paper consolidates and interprets the literature on the term structure, as it stands today. Definitions of rates of return, forward rates and holding returns for all time intervals are treated here in a uniform manner and their interrelations, exact or approximate, delineated. The concept of duration is used throughout to simplify mathematical expressions. Continuous compounding is used where possible, to avoid arbitrary distinctions based on compounding assumptions. Both the theoretical and the empirical literature are treated. The attached tables by J. Huston McCulloch give term structure data for U. S. government securities 1946-1987. The tables give discount bond yields, forward rates and par bond yields as defined in the paper. The data relate to the concepts in the paper more precisely than does any previously published data series.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2341.

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Date of creation: Aug 1987
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Handle: RePEc:nbr:nberwo:2341

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References listed on IDEAS
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    Other versions:
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  27. David Backus & William C. Brainard & Gary Smith & James Tobin, 1980. "A Model of U.S. Financial and Nonfinancial Economic Behavior," Cowles Foundation Discussion Papers 548, Cowles Foundation, Yale University. [Downloadable!]
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  28. Hansen, Lars Peter & Singleton, Kenneth J, 1983. "Stochastic Consumption, Risk Aversion, and the Temporal Behavior of Asset Returns," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 249-65, April. [Downloadable!] (restricted)
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  30. Long, John Jr., 1974. "Stock prices, inflation, and the term structure of interest rates," Journal of Financial Economics, Elsevier, vol. 1(2), pages 131-170, July. [Downloadable!] (restricted)
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  34. Campbell, John Y & Shiller, Robert J, 1984. "A Simple Account of the Behavior of Long-Term Interest Rates," American Economic Review, American Economic Association, vol. 74(2), pages 44-48, May. [Downloadable!] (restricted)
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