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The Informational Content Of Forward Rates: Further Evidence

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  • Daniel T. Walz
  • Roger W. Spencer

Abstract

Using single‐equation estimation techniques, researchers have generally found that forward rates have little ability to predict future spot rates. In this paper, Generalized Least Squares is used to estimate simultaneously the forecastive ability of multiple forward rates. It is discovered that current forward rates significantly predict future spot rates for various rate maturities up to twelve months ahead. Also found are instances in which the Treasury bill market does not conform to the weak form of market efficiency.

Suggested Citation

  • Daniel T. Walz & Roger W. Spencer, 1989. "The Informational Content Of Forward Rates: Further Evidence," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 12(1), pages 69-81, March.
  • Handle: RePEc:bla:jfnres:v:12:y:1989:i:1:p:69-81
    DOI: 10.1111/j.1475-6803.1989.tb00102.x
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    Cited by:

    1. Yvon Fauvel & Alain Paquet & Christian Zimmermann, 1999. "A Survey on Interest Rate Forecasting," Cahiers de recherche CREFE / CREFE Working Papers 87, CREFE, Université du Québec à Montréal.
    2. Ederington, Louis H. & Huang, Chao-Hsi, 1995. "Parameter uncertainty and the rational expectations model of the term structure," Journal of Banking & Finance, Elsevier, vol. 19(2), pages 207-223, May.

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