Download or read book The Empirical Failure of the Expectations Hypothesis of the Term Structure of Bond Yields written by Lucio Sarno and published by . This book was released on 2005 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Revisiting the Expectations Hypothesis of the Term Structure of Interest Rates written by George Bulkley and published by . This book was released on 2008 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: The expectations hypothesis of the term structure has been decisively rejected by a large empirical literature that spans several decades. In this paper, using a newly constructed dataset of synthetic zero coupon bond yields, we show that evidence against the expectations hypothesis became very much weaker following the widespread acceptance of its empirical failure to describe the behavior of interest rates in the early 1990s. Indeed, in the period 1991-2004, the expectations hypothesis cannot be rejected for most bond maturities. These results are consistent with the idea that asset pricing anomalies tend to disappear once they are widely recognized.

Download or read book The Empirical Failure of the Expectations Hyothesis of the Term Structure of Bond Yields written by Lucio Sarno and published by . This book was released on 2005 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book New Evidence on the Expectations Hypothesis of the Term Structure of Bond Yields written by and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: "This paper tests the expectations hypothesis (EH) with the data used in Campbell and Shiller's (1991) seminal work on the EH using a Lagrange multiplier test developed recently by Bekaert and Hodrick (2001). This test is applied under the assumption that interest rates are integrated of order one, I(1), as in Campbell and Shiller (1987), and under the assumption that interest rates are stationary. We also extend the literature beyond the bivariate comparisons of long-term and short-term rates which dominates the EH testing literature. In addition, we examine the linkage between the term structure and macrcoeconomic variables. Consistent with the findings of Campbell and Shiller (1991), the EH is rejected at the short end of the maturity spectrum but not at the longer end. The EH is rejected at the longer end of the term structure when more than two rates or the relationship between the term structure and the macroeconomy are considered. Moreover, we find that evaluating the EH using the ratio of the variance of the forecasted long-term rate (or rate spread) under the EH to the observed variance generates misleading information about the merit of the EH"--Federal Reserve Bank of St. Louis web site.

Download or read book The Empirical Failure of the Expectations Hypotheis of the Term Structure of Bond Yields written by Lucio Sarno and published by . This book was released on 2005 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Term Structure of Expectations and Bond Yields written by Richard K. Crump and published by . This book was released on 2018 with total page 88 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bond yields can be decomposed into expected short rates and term premiums. We directly measure the former using all available U.S. professional forecasts and obtain the latter as the difference between bond yields and survey-based expected short rates. While the behavior of nominal and real short rate expectations is consistent with standard macroeconomic theory, term premiums account for the bulk of the cross-sectional and time series variation in yields. They also largely explain the yield curve's reaction to a host of structural economic shocks. This dramatic failure of the expectations hypothesis highlights the importance of term premiums for macro-financial transmission.

Download or read book The Empirical Failure of the Expectations Hypothesis of the Term Structure of Bond Yeilds written by Lucio Sarno and published by . This book was released on 2005 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Expectations Theory of Term Structure written by Johura Begum and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The Yield curve is very prominent in the economics and finance literature to analyze the behavior of households and investors towards bonds markets. In this paper we explore and test the Expectations Hypothesis (EH) of the term structure for a number of international bond markets. We use data at the short and long end maturities for the Treasury bill rate and the Government of Canada bond rate. The sample includes monthly yields for maturities ranging from 1, 3, 5-month treasury bills and 1, 5, 10 and more years for Government of Canada bonds, USA bonds, UK bonds and France bonds. We use the Engle-Granger cointegration test and OLS to estimate the spread between short and long term interest rates, including tests for serial correlation in residuals, and to test the validity of the EH. The EH is rejected in all cases.

Download or read book Long Term Bond Yields Monetary Policy and the Expectations Hypothesis of the Term Structure of Interest Rates written by Peter Kugler and published by . This book was released on 1996 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book What Do You Expect written by Sharon Kozicki and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Explaining the Failures of the Term Spread Models of the Rational Expectations Hypothesis of the Term Structure written by Elias Tzavalis and published by . This book was released on 1997 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Contrary to the predictions of the rational expectations hypothesis of the term structure of interest rates, empirical evidence suggests that the term spread between long and short rates fails to forecast future movements of long term rates although its forecasts of future short term rates are in the correct direction. In this paper, we show that this puzzling behaviour of the term spread alone can be explained by a time-varying term premium which is correlated with the term spread. Once this is accounted for neither expression of the expectations hypothesis is against the predictions of the theory.

Download or read book The Term Structure of Interest Rates written by David Meiselman and published by . This book was released on 1962 with total page 96 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book A Simple Account of the Behavior of Long term Interest Rates written by John Y. Campbell and published by . This book was released on 1983 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent empirical research on the term structure of interest rates has shown that the long-term interest rate is well described by adistributed lag on short-term interest rates, but does not conform to the expectations theory of the term structure. It has been suggested that the long rate "overreacts" to the short rate. This paper presents aunified taxonomy of risk premia, or deviations from the expectations theory. This enables the hypothesis of overreaction to be formally stated. It is shown that, if anything, the long rate has underreacted to the short rate. However, the independent movement of the long rate is primarily responsible for the failure of the expectations theory.

Download or read book Disappointment Aversion Term Structure and Predictability Puzzles in Bond Markets written by Patrick Augustin and published by . This book was released on 2016 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: We solve a dynamic general equilibrium model with generalized disappointment aversion preferences and continuous state endowment dynamics. We apply the framework to the term structure of interest rates and show that the model generates an upward sloping term structure of nominal interest rates, a downward sloping term structure of real interest rates, and that it accounts for the failure of the expectations hypothesis. The key ingredients are disappointment aversion preferences, preference for early resolution of uncertainty, and a parsimonious endowment economy with three state variables: time-varying macroeconomic uncertainty, time-varying expected inflation and inflation uncertainty.

Download or read book Does the Failure of the Expectations Hypothesis Matter for Long term Investors written by Antonios Sangvinatsos and published by . This book was released on 2003 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider the consumption and portfolio choice problem of a long-run investor when the term structure is affine and when the investor has access to nominal bonds and a stock portfolio. In the presence of unhedgeable inflation risk, there exist multiple pricing kernels that produce the same bond prices, but a unique pricing kernel equal to the marginal utility of the investor. We apply our method to a three-factor Gaussian model with a time-varying price of risk that captures the failure of the expectations hypothesis seen in the data. We extend this model to account for time-varying expected inflation, and estimate the model with both inflation and term structure data. The estimates imply that the bond portfolio for the long-run investor looks very different from the portfolio of a mean-variance optimizer. In particular, the desire to hedge changes in term premia generates large hedging demands for long-term bonds.

Download or read book Ambiguity Nominal Bond Yields and Real Bond Yields written by Guihai Zhao and published by . This book was released on 2018 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Cyclical Behavior of the Term Structure of Interest Rates written by Reuben A. Kessel and published by . This book was released on 1965 with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt: