Predictable Changes in Yields and Forward Rates / David Backus, Silverio Foresi, Abon Mozumdar, Liuren Wu.

Format:

Book

Author/Creator:

Backus, David.

Contributor:

National Bureau of Economic Research.

Foresi, Silverio.

Mozumdar, Abon.

Wu, Liuren.

Series:

Working Paper Series (National Bureau of Economic Research) no. w6379.

NBER working paper series no. w6379

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1998.

Summary:

We consider the patterns in the predictability of interest rates expectations hypothesis (EH), and attempt to account for them with affine models. We make the following points: (i) Discrepancies in the data from the EH take a particularly simple form with forward rates: as theory suggests, the largest discrepancies are at short maturities. (ii) Reasonable estimates of one-factor Cox-Ingersoll-Ross models imply regressions on the opposite side of the EH than we see in the data: regression slopes are greater than one (iii) Multifactore affine models can nevertheless approximate both departures from the EH and other properties of interest rates.

Notes:

Print version record

January 1998.