Do Long-Term Interest Rates Overreact to Short-Term Interest Rates?
This paper examines the hypothesis that financial markets are myopic by studying the term structure of interest rates. White rejecting decisively the traditional expectations hypothesis regarding the term structure, our statistical results also lead us to conclude that long term interest rates do not overreact to either the level or the change in short termrates. This finding suggests that participants in bond markets are not myopic or overly sensitive to recent events. Our statistical results also suggest that most variations in the yield curve reflect changes in liquidity premia rather than expected changes in interest rates.
(This abstract was borrowed from another version of this item.)
Volume (Year): 15 (1984)
Issue (Month): 1 ()
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