Modelling the Yield Curve

Author/Editor:

Mark P. Taylor

Publication Date:

December 1, 1991

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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. 91/134

English

Publication Date:

December 1, 1991

ISBN/ISSN:

9781451931457/1018-5941

Stock No:

WPIEA1341991

Format:

Paper

Pages:

38

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