A Defense of Traditional Hypotheses about the Term Structure of Interest Rates
Expectations theories of asset returns may be interpreted as stating either that risk premia are zero, or that they are constant through time. Under the former interpretation, different versions of the expectations theory of the term structure are inconsistent with one another, but I show that this does not necessarily carry over to the constant risk premium interpretation of the theory. Furthermore, I argue that differences among expectations theories are of 'second order" in a precise mathematical sense. I present an approximate linearized framework for analysis of the term structure in which these differences disappear, and I test its accuracy in practice using data from the CRSP government bond tapes.
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Volume (Year): 41 (1986)
Issue (Month): 1 (March)
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- McCulloch, J Huston, 1971.
"Measuring the Term Structure of Interest Rates,"
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Brookings Papers on Economic Activity,
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- John Y. Campbell & Robert J. Shiller, 1983.
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- Shiller, Robert & Campbell, John, 1984. "A Simple Account of the Behavior of Long-Term Interest Rates," Scholarly Articles 3208216, Harvard University Department of Economics.
- Robert J. Shiller & John Y. Campbell & Kermit L. Schoenholtz, 1983.
"Forward Rates and Future Policy: Interpreting the Term Structure of Interest Rates,"
Brookings Papers on Economic Activity,
Economic Studies Program, The Brookings Institution, vol. 14(1), pages 173-224.
- Robert J. Shiller & John Y. Campbell & Kermit L. Schoenholtz, 1983. "Forward Rates and Future Policy: Interpreting the Term Structure of Interest Rates," Cowles Foundation Discussion Papers 667, Cowles Foundation for Research in Economics, Yale University.
- Cox, John C & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1981. "A Re-examination of Traditional Hypotheses about the Term Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 36(4), pages 769-99, September.
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