Modelling the Yield Curve
Summary:
We test and estimate a variety of alternative models of the yield curve, using weekly, high-quality U.K. data. We extend the Campbell-Shiller technique to the overlapping data case and apply it to reject the pure expectations hypothesis under rational expectations. We also find that risk measures, in the form of conditional interest rate volatility, are unable to explain the term premium. A simple, market segmentation approach is, however, moderately successful in explaining the term premium.
Series:
Working Paper No. 1991/134
Subject:
Bonds Econometric analysis Financial institutions Financial services Short term interest rates Treasury bills and bonds Vector autoregression Yield curve
English
Publication Date:
December 1, 1991
ISBN/ISSN:
9781451931457/1018-5941
Stock No:
WPIEA1341991
Pages:
38
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