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The volatility of US term structure term premia 1952 - 1991



Recent studies suggest that the term premia within the US Term Structure of Interest Rates may be adequately characterized as univariate GARCH(1, 1)-M processes, with highly persistent or even potentially explosive conditional variances. Tzavalis and Wickens (Economics Letters, 49, 1995) using data over the period 1970-1986 argue that such findings may be the result of the failure of the GARCH-M model to allow for the 1979-82 change in US monetary policy. Using an alternative approach, the results in this paper suggest that the conclusion of Tzavalis and Wickens may not be independent of the sample period considered. However the GARCH-M model provides implausible estimates of the term premia when estimated over the full sample period.

Suggested Citation

  • Olan Henry, 1999. "The volatility of US term structure term premia 1952 - 1991," Applied Financial Economics, Taylor & Francis Journals, vol. 9(3), pages 263-271.
  • Handle: RePEc:taf:apfiec:v:9:y:1999:i:3:p:263-271
    DOI: 10.1080/096031099332339

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    Cited by:

    1. Jongen, Ron & Verschoor, Willem F.C. & Wolff, Christian C.P., 2011. "Time-variation in term premia: International survey-based evidence," Journal of International Money and Finance, Elsevier, vol. 30(4), pages 605-622, June.

    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling


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