Skip to main content
Our website will undergo scheduled maintenance on Sunday, December 17. During this time, connection to our website and some of its features may be unavailable. Thank you for your patience and we apologize for any inconvenience.
Skip to main content
SHARE   Share on Twitter Share on Facebook Share on LinkedIn Email

Predictions of Short-Term Rates and the Expectations Hypothesis of the Term Structure of Interest Rates

Despite its important role in macroeconomics and finance, the expectations hypothesis (EH) of the term structure of interest rates has received little empirical support. While the EH's poor performance has been attributed to a variety of sources, none appear to account for the EH's poor performance. Recent evidence (Diebold and Li, 2003; Duffee, 2002; and Carriero, et al., 2003) suggests the possibility that the EH's poor performance may be due to market participants' relative inability to forecast the short-term rate. This possibility is investigate by comparing h-month ahead forecasts for the 1-month Treasury yield implied by the EH with the forecasts from both random-walk model and a three factor model of the term structure.

Read Full Text


Subscribe to our newsletter


Follow us

Twitter logo Google Plus logo Facebook logo YouTube logo LinkedIn logo
Back to Top