IDEAS home Printed from https://ideas.repec.org/a/bla/manch2/v61y1993i0p13-34.html
   My bibliography  Save this article

Reading the Message from the U.K. Indexed Bond Market: Real Interest Rates, Expected Inflation and the Risk Premium

Author

Listed:
  • Levin, Eric J
  • Copeland, Laurence S

Abstract

The eight-month lag in the indexation of the value of U.K. index-linked gilts, far from being a nuisance, actually makes possible the derivation of estimates of expected inflation from a comparison of the prices of two indexed bonds differing only in their durations, without recourse to any information from the market for conventional gilts. Nominal bond prices can then be used to derive the inflation risk premium. Following this approach, and assuming a stochastic valuation equation to allow for mispricing, the authors fit bond pricing equations to cross-section data for 44 conventional and 11 indexed gilts between 1984 and 1991. They conclude that the real interest rate has more than doubled since 1983. Copyright 1993 by Blackwell Publishers Ltd and The Victoria University of Manchester

Suggested Citation

  • Levin, Eric J & Copeland, Laurence S, 1993. "Reading the Message from the U.K. Indexed Bond Market: Real Interest Rates, Expected Inflation and the Risk Premium," The Manchester School of Economic & Social Studies, University of Manchester, vol. 61(0), pages 13-34, Suppl..
  • Handle: RePEc:bla:manch2:v:61:y:1993:i:0:p:13-34
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Robertson, Donald & Symons, James, 1997. "Real Interest Rates and Index-Linked Gilts," The Manchester School of Economic & Social Studies, University of Manchester, vol. 65(1), pages 25-43, January.
    2. Kanas, Angelos, 2014. "Bond futures, inflation-indexed bonds, and inflation risk premium," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 28(C), pages 82-99.
    3. Juan Ayuso Huertas, 1996. "Un análisis empírico de los tipos de interés reales ex-ante en España," Investigaciones Economicas, Fundación SEPI, vol. 20(3), pages 321-338, September.
    4. Francis Breedon & Jag Chadha, 1997. "The Information Content of the Inflation Term Structure," Bank of England working papers 75, Bank of England.
    5. Robertson, D. & Symons, J., 1993. "Five weeks in the life of the pound: interest rates," LSE Research Online Documents on Economics 20983, London School of Economics and Political Science, LSE Library.
    6. Madureira, Leonardo, 2007. "The ex ante real rate and inflation premium under a habit consumption model," Journal of Empirical Finance, Elsevier, vol. 14(3), pages 355-382, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:manch2:v:61:y:1993:i:0:p:13-34. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/semanuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.