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The expectations hypothesis of the term structure of interest rates: The Brazilian case revisited

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  • João F. Caldeira
  • Emanuelle N. Smaniotto

Abstract

This article tests the Expectations Hypothesis (EH) using Brazilian monthly data for bond yields spanning the 2000–2017 sample period and ranging in maturity from 3 months to 5 years. Three tests are examined: the first is based on interest rates spread and the other two are based on the forward rates. On balance our results suggest rejection of the EH throughout the maturity spectrum examined, and are broadly consistent with previous findings that a linear combination of forward rates provides a statistically significant prediction of bond excess returns.

Suggested Citation

  • João F. Caldeira & Emanuelle N. Smaniotto, 2019. "The expectations hypothesis of the term structure of interest rates: The Brazilian case revisited," Applied Economics Letters, Taylor & Francis Journals, vol. 26(8), pages 633-637, May.
    • Handle: RePEc:taf:apeclt:v:26:y:2019:i:8:p:633-637
    DOI: 10.1080/13504851.2018.1488053
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    Cited by:

    1. Harrathi Nizar & Alhoshan Hamed M., 2020. "Validity of the Expectations Hypothesis of the Term Structure of Interest Rates: The Case of Saudi Arabia," Review of Middle East Economics and Finance, De Gruyter, vol. 16(1), pages 1-18, April.

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