Term Premia and the Maturity Composition of the Federal Debt: New Evidence from the Term Structure of Interest Rates
This paper models bond term premia empirically in terms of the maturity composition of the federal debt and other observable economic variables in a time-varying framework with potential regime shifts. We present regression and out-of sample forecasting results demonstrating that information on the age composition of the Federal debt is useful for forecasting term premia. We show that the multiprocess mixture model, a multi-state time-varying parameter model, outperforms the commonly used GARCH model in out-of-sample forecasts of term premia. The results underscore the importance of modelling term premia, as a function of economic variables rather than just as a function of asset covariances as in the conditional heteroscedasticity models. Copyright © 2001 by John Wiley & Sons, Ltd.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" 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.
Volume (Year): 20 (2001)
Issue (Month): 7 (November)
|Contact details of provider:|| Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/2966|
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.:
- Hamilton, James D., 1988. "Rational-expectations econometric analysis of changes in regime : An investigation of the term structure of interest rates," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 385-423.
- Campbell, John Y., 1987.
"Stock returns and the term structure,"
Journal of Financial Economics,
Elsevier, vol. 18(2), pages 373-399, June.
- John Y. Campbell, 1985. "Stock Returns and the Term Structure," NBER Working Papers 1626, National Bureau of Economic Research, Inc.
- Campbell, John, 1987. "Stock Returns and the Term Structure," Scholarly Articles 3207699, Harvard University Department of Economics.
- V. Vance Roley, 1982. "The Effect of Federal Debt-Management Policy on Corporate Bond and Equity Yields," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 645-668.
- John Y. Campbell, 1995. "Some Lessons from the Yield Curve," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 129-152, Summer.
- John Y. Campbell, 1995. "Some Lessons from the Yield Curve," NBER Working Papers 5031, National Bureau of Economic Research, Inc.
- Campbell, John, 1995. "Some Lessons from the Yield Curve," Scholarly Articles 3163264, Harvard University Department of Economics.
- John Y. Campbell, 1995. "Some Lessons from the Yield Curve," Harvard Institute of Economic Research Working Papers 1713, Harvard - Institute of Economic Research.
- Evans, Martin D. D. & Lewis, Karen K., 1994. "Do stationary risk premia explain it all?: Evidence from the term structure," Journal of Monetary Economics, Elsevier, vol. 33(2), pages 285-318, April.
- Martin D. Evans & Karen K. Lewis, 1992. "Do Stationary Risk Premia Explain It All? Evidence from the Term Structure," Working Papers 92-11, New York University, Leonard N. Stern School of Business, Department of Economics.
- Friedman, Benjamin M & Kuttner, Kenneth N, 1992. "Time-Varying Risk Perceptions and the Pricing of Risky Assets," Oxford Economic Papers, Oxford University Press, vol. 44(4), pages 566-598, October.
- Benjamin M. Friedman & Kenneth N. Kuttner, 1988. "Time-Varying Risk Perceptions and the Pricing of Risky Assets," NBER Working Papers 2694, National Bureau of Economic Research, Inc.
- Henriksson, Roy D & Merton, Robert C, 1981. "On Market Timing and Investment Performance. II. Statistical Procedures for Evaluating Forecasting Skills," The Journal of Business, University of Chicago Press, vol. 54(4), pages 513-533, October.
- 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.
- Hardouvelis, Gikas A., 1994. "The term structure spread and future changes in long and short rates in the G7 countries: Is there a puzzle?," Journal of Monetary Economics, Elsevier, vol. 33(2), pages 255-283, April.
- Friedman, Benjamin M, 1979. "Substitution and Expectation Effects on Long-Term Borrowing Behavior and Long-Term Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(2), pages 131-150, May.
- Granger, Clive W. J. & King, Maxwell L. & White, Halbert, 1995. "Comments on testing economic theories and the use of model selection criteria," Journal of Econometrics, Elsevier, vol. 67(1), pages 173-187, May.
- Wallace, Myles S & Warner, John T, 1996. "Do Excess Holding-Period Returns Depend on the Composition of Outstanding Federal Debt?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(1), pages 132-139, February.
- Franco Modigliani & Richard Sutch, 1967. "Debt Management and the Term Structure of Interest Rates: An Empirical Analysis of Recent Experience," Journal of Political Economy, University of Chicago Press, vol. 75, pages 569-569.
- Swanson, Norman R & White, Halbert, 1995. "A Model-Selection Approach to Assessing the Information in the Term Structure Using Linear Models and Artificial Neural Networks," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 265-275, July.
- Jones, David S. & Vance Roley, V., 1983. "Rational expectations and the expectations model of the term structure : A test using weekly data," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 453-465, September.
- Hall, Anthony D & Anderson, Heather M & Granger, Clive W J, 1992. "A Cointegration Analysis of Treasury Bill Yields," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 116-126, February. Full references (including those not matched with items on IDEAS)