IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

The Term Structure of Interest Rates

  • Robert J. Shiller
  • J. Huston McCulloch

This paper consolidates and interprets the literature on the term structure, as it stands today. Definitions of rates of return, forward rates and holding returns for all time intervals are treated here in a uniform manner and their interrelations, exact or approximate, delineated. The concept of duration is used throughout to simplify mathematical expressions. Continuous compounding is used where possible, to avoid arbitrary distinctions based on compounding assumptions. Both the theoretical and the empirical literature are treated. The attached tables by J. Huston McCulloch give term structure data for U. S. government securities 1946-1987. The tables give discount bond yields, forward rates and par bond yields as defined in the paper. The data relate to the concepts in the paper more precisely than does any previously published data series.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/papers/w2341.pdf
Download Restriction: no

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2341.

as
in new window

Length:
Date of creation: Aug 1987
Date of revision:
Publication status: published as Benjamin Friedman and Frank Hahn, eds., Handbook of Monetary Economics, North Holland 1980
Handle: RePEc:nbr:nberwo:2341
Note: ME
Contact details of provider: Postal:
National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.

Phone: 617-868-3900
Web page: http://www.nber.org
Email:


More information through EDIRC

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.:

as in new window
  1. Lawrence H. Summers, 1982. "Do We Really Know That Financial Markets Are Efficient?," NBER Working Papers 0994, National Bureau of Economic Research, Inc.
  2. Kane, Edward J, 1980. " Market Incompleteness and Divergences between Forward and Future Interest Rates," Journal of Finance, American Finance Association, vol. 35(2), pages 221-34, May.
  3. Brown, Stephen J & Dybvig, Philip H, 1986. " The Empirical Implications of the Cox, Ingersoll, Ross Theory of the Term Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 41(3), pages 617-30, July.
  4. John H. Wood, 1963. "Expectations, Errors, and the Term Structure of Interest Rates," Journal of Political Economy, University of Chicago Press, vol. 71, pages 160.
  5. Benninga, Simon & Protopapadakis, Aris, 1983. "Real and Nominal Interest Rates under Uncertainty: The Fisher Theorem and the Term Structure," Journal of Political Economy, University of Chicago Press, vol. 91(5), pages 856-67, October.
  6. Marsh, Terry A & Rosenfeld, Eric R, 1983. " Stochastic Processes for Interest Rates and Equilibrium Bond Prices," Journal of Finance, American Finance Association, vol. 38(2), pages 635-46, May.
  7. Grossman, S J & Melino, Angelo & Shiller, Robert J, 1987. "Estimating the Continuous-Time Consumption-Based Asset-Pricing Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(3), pages 315-27, July.
  8. 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.
  9. Frederic S. Mishkin, 1978. "Efficient-Markets Theory: Implications for Monetary Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 9(3), pages 707-752.
  10. Hansen, Lars Peter & Singleton, Kenneth J, 1983. "Stochastic Consumption, Risk Aversion, and the Temporal Behavior of Asset Returns," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 249-65, April.
  11. Hamburger, Michael J & Platt, Elliott N, 1975. "The Expectations Hypothesis and the Efficiency of the Treasury Bill Market," The Review of Economics and Statistics, MIT Press, vol. 57(2), pages 190-99, May.
  12. Jacob B. Michaelsen, 1965. "The Term Structure Of Interest Rates And Holdingā€Period Yields On Government Securities," Journal of Finance, American Finance Association, vol. 20(3), pages 444-463, 09.
  13. Richard, Scott F., 1978. "An arbitrage model of the term structure of interest rates," Journal of Financial Economics, Elsevier, vol. 6(1), pages 33-57, March.
  14. Marsh, Terry, 1980. " Equilibrium Term Structure Models: Test Methodology," Journal of Finance, American Finance Association, vol. 35(2), pages 421-35, May.
  15. Smith, B. R., 1980. "Modelling New Zealand's energy system," European Journal of Operational Research, Elsevier, vol. 4(3), pages 173-184, March.
  16. Startz, Richard, 1982. "Do forecast errors or term premia really make the difference between long and short rates?," Journal of Financial Economics, Elsevier, vol. 10(3), pages 323-329, November.
  17. LeRoy, Stephen F, 1982. " Expectations Models of Asset Prices: A Survey of Theory," Journal of Finance, American Finance Association, vol. 37(1), pages 185-217, March.
  18. Hendershott, Patric H, 1971. "A Flow-of-Funds Model: Estimates for the Nonbank Finance Sector," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 3(4), pages 815-32, November.
  19. Brealey, Richard & Schaefer, Stephen M, 1977. "Term Structure with Uncertain Inflation," Journal of Finance, American Finance Association, vol. 32(2), pages 277-89, May.
  20. Vasicek, Oldrich A & Fong, H Gifford, 1982. " Term Structure Modeling Using Exponential Splines," Journal of Finance, American Finance Association, vol. 37(2), pages 339-48, May.
  21. Cox, John C & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1985. "An Intertemporal General Equilibrium Model of Asset Prices," Econometrica, Econometric Society, vol. 53(2), pages 363-84, March.
  22. Kenneth B. Dunn & Kenneth J. Singleton, 1984. "Modeling the Term Structure of Interest Rates Under Nonseparable Utilityand Duriability of Goods," NBER Working Papers 1415, National Bureau of Economic Research, Inc.
  23. Langetieg, Terence C, 1980. " A Multivariate Model of the Term Structure," Journal of Finance, American Finance Association, vol. 35(1), pages 71-97, March.
  24. Echols, Michael E. & Elliott, Jan Walter, 1976. "A Quantitative Yield Curve Model for Estimating the Term Structure of Interest Rates," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 11(01), pages 87-114, March.
  25. Donald B. Keim & Robert F. Stambaugh, . "Predicting Returns in the Stock and Bond Markets," Rodney L. White Center for Financial Research Working Papers 15-85, Wharton School Rodney L. White Center for Financial Research.
  26. Dothan, L. Uri, 1978. "On the term structure of interest rates," Journal of Financial Economics, Elsevier, vol. 6(1), pages 59-69, March.
  27. N. Gregory Mankiw & Jeffrey A. Miron & David N. Weil, 1987. "The Adjustment of Expectations to a Change in Regime: A Study of the Founding of the Federal Reserve," NBER Working Papers 2124, National Bureau of Economic Research, Inc.
  28. F. A. Lutz, 1940. "The Structure of Interest Rates," The Quarterly Journal of Economics, Oxford University Press, vol. 55(1), pages 36-63.
  29. Woodward, Susan E, 1983. "The Liquidity Premium and the Solidity Premium," American Economic Review, American Economic Association, vol. 73(3), pages 348-61, June.
  30. David Durand, 1942. "Basic Yields of Corporate Bonds, 1900-1942," NBER Chapters, in: Basic Yields of Corporate Bonds, 1900-1942, pages 1-40 National Bureau of Economic Research, Inc.
  31. Robert Haney Scott, 1965. "Liquidity and the Term Structure of Interest Rates," The Quarterly Journal of Economics, Oxford University Press, vol. 79(1), pages 135-145.
  32. McCulloch, J Huston, 1971. "Measuring the Term Structure of Interest Rates," The Journal of Business, University of Chicago Press, vol. 44(1), pages 19-31, January.
  33. Friedman, Benjamin M & Roley, V Vance, 1979. "Investors' Portfolio Behavior under Alternative Models of Long-Term Interest Rate Expectations: Unitary, Rational, or Autoregressive," Econometrica, Econometric Society, vol. 47(6), pages 1475-97, November.
  34. LeRoy, Stephen F & Porter, Richard D, 1981. "The Present-Value Relation: Tests Based on Implied Variance Bounds," Econometrica, Econometric Society, vol. 49(3), pages 555-74, May.
  35. 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.
  36. Begg, David K H, 1984. "Rational Expectations and Bond Pricing: Modelling the Term Structure with and without Certainty Equivalence," Economic Journal, Royal Economic Society, vol. 94(376a), pages 45-58, Supplemen.
  37. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December.
  38. Kenneth A. Froot, 1987. "New Hope for the Expectations Hypothesis of the Term Structure of Interest Rates," NBER Working Papers 2363, National Bureau of Economic Research, Inc.
  39. J. E. Stiglitz, 1970. "A Consumption-Oriented Theory of the Demand for Financial Assets and the Term Structure of Interest Rates," Review of Economic Studies, Oxford University Press, vol. 37(3), pages 321-351.
  40. Pesando, James E, 1975. "Determinants of Term Premiums in the Market for United States Treasury Bills," Journal of Finance, American Finance Association, vol. 30(5), pages 1317-27, December.
  41. Modigliani, Franco & Shiller, Robert J, 1973. "Inflation, Rational Expectations and the Term Structure of Interest Rates," Economica, London School of Economics and Political Science, vol. 40(157), pages 12-43, February.
  42. Smith, James L, 1980. "A Probabilistic Model of Oil Discovery," The Review of Economics and Statistics, MIT Press, vol. 62(4), pages 587-94, November.
  43. N. Gregory Mankiw & Jeffrey A. Miron, 1985. "The Changing Behavior of the Term Structure of Interest Rates," NBER Working Papers 1669, National Bureau of Economic Research, Inc.
  44. Jordan, James V, 1984. " Tax Effects in Term Structure Estimation," Journal of Finance, American Finance Association, vol. 39(2), pages 393-406, June.
  45. Reuben A. Kessel, 1965. "The Cyclical Behavior of the Term Structure of Interest Rates," NBER Books, National Bureau of Economic Research, Inc, number kess65-1.
  46. David Durand, 1942. "Basic Yields of Corporate Bonds, 1900-1942," NBER Books, National Bureau of Economic Research, Inc, number dura42-1.
  47. Brennan, Michael J & Schwartz, Eduardo S, 1980. " Conditional Predictions of Bond Prices and Returns," Journal of Finance, American Finance Association, vol. 35(2), pages 405-17, May.
  48. Dobson, Steven W & Sutch, Richard C & Vanderford, David E, 1976. "An Evaluation of Alternative Empirical Models of the Term Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 31(4), pages 1035-65, September.
  49. Shea, Gary S., 1984. "Pitfalls in Smoothing Interest Rate Term Structure Data: Equilibrium Models and Spline Approximations," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 19(03), pages 253-269, September.
  50. 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.
  51. Charls E. Walker, 1954. "Federal Reserve Policy and the Structure of Interest Rates on Government Securities," The Quarterly Journal of Economics, Oxford University Press, vol. 68(1), pages 19-42.
  52. Hopewell, Michael H & Kaufman, George G, 1973. "Bond Price Volatility and Term to Maturity: A Generalized Respecification," American Economic Review, American Economic Association, vol. 63(4), pages 749-53, September.
  53. Llad Phillips & John Pippenger, 1976. "Preferred habitat vs. efficient market: a test of alternative hypotheses," Review, Federal Reserve Bank of St. Louis, issue May, pages 11-19.
  54. Dobson, Steven W, 1978. "Estimating Term Structure Equations with Individual Bond Data," Journal of Finance, American Finance Association, vol. 33(1), pages 75-92, March.
  55. Walsh, Carl E, 1985. " A Rational Expectations Model of Term Premia with Some Implications for Empirical Asset Demand Equations," Journal of Finance, American Finance Association, vol. 40(1), pages 63-83, March.
  56. Ingersoll, Jonathan E. & Skelton, Jeffrey & Weil, Roman L., 1978. "Duration Forty Years Later," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 13(04), pages 627-650, November.
  57. Flavin, Marjorie A, 1983. "Excess Volatility in the Financial Markets: A Reassessment of the Empirical Evidence," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 929-56, December.
  58. J. M. Culbertson, 1957. "The Term Structure of Interest Rates," The Quarterly Journal of Economics, Oxford University Press, vol. 71(4), pages 485-517.
  59. McCallum, John S, 1975. "The Expected Holding Period Return, Uncertainty and the Term Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 30(2), pages 307-23, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2341. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.