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Risk Premia and Long Rates in Ireland

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  • Cuthbertson, Keith
  • Bredin, Don

Abstract

Using a number of long-term maturities and monthly data, 1989-97, we provide a number of tests of the expectations hypothesis (EH) of the term structure. The main insight in this paper is the use of the excess holding period return to provide a proxy for a possible time-varying term premium. Nearly all previous studies using the VAR methodology have used only the spread and the change in (short) rates and they have ignored the excess holding period return. We find that we cannot reject the EH, but we do reject the presence of time-varying risk premia. Copyright © 2001 by John Wiley & Sons, Ltd.

Suggested Citation

  • Cuthbertson, Keith & Bredin, Don, 2001. "Risk Premia and Long Rates in Ireland," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 20(6), pages 391-403, September.
    • Handle: RePEc:jof:jforec:v:20:y:2001:i:6:p:391-403
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    Cited by:

    1. Pawel Milobedzki, 2012. "The Expectations Hypothesis of the Term Structure of LIBOR US Dollar Interest Rates," Dynamic Econometric Models, Uniwersytet Mikolaja Kopernika, vol. 12, pages 5-18.
    2. Bredin, Don, 2001. "Alternative Tests of the Expectations Hypothesis of the Term Structure of Interest Rates," Research Technical Papers 2/RT/01, Central Bank of Ireland.

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