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Variance-in-mean effects of the long forward-rate slope

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  • Charlotte Christiansen

Abstract

This paper contains an empirical analysis of the dependence of the long forward-rate slope on the long-rate variance. The long forward-rate slope and the long rate are described by a bivariate GARCH-in-mean model. In accordance with theory, a negative long-rate variance-in-mean effect for the long forward-rate slope is documented. Thus, the greater the long-rate variance, the steeper the long forward-rate curve slopes downward (the long forward-rate slope is negative). The variance-in-mean effect is both statistically and economically significant.

Suggested Citation

  • Charlotte Christiansen, 2005. "Variance-in-mean effects of the long forward-rate slope," Applied Financial Economics, Taylor & Francis Journals, vol. 15(11), pages 753-755.
  • Handle: RePEc:taf:apfiec:v:15:y:2005:i:11:p:753-755
    DOI: 10.1080/09603100500166152
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    1. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
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