The Expectations Hypothesis of the Term Structure: Tests on US, German, French, and UK Euro-Rates
34 Pages Posted: 7 Jan 2011
Date Written: June 1, 1996
Abstract
This paper deals with tests of the expectations hypothesis of the term structure on French, German, UK and US short-term interest rates. Three tests are examined: the first is based on forward rates and the other two are based on the interest rates spread. First, we show that the puzzle highlighted by Campbell and Shiller (1991) for US data does not hold in the cases of French and UK short-term rates. Second, we propose tests for the expectations hypothesis based on error-correction specifications. These tests are shown to be much more favorable for the theory and the initial puzzle disappears.
Keywords: Term structure of interest rates, Expectations hypothesis, Error-correction model
JEL Classification: E43
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Yield Spreads and Interest Rate Movements: A Bird's Eye View
-
Parsimoneous Modeling of Yield Curves for U.S. Treasury Bills
-
Estimating and Interpreting Forward Interest Rates: Sweden 1992 - 1994
-
Estimating and Interpreting Forward Interest Rates: Sweden 1992-1994
-
The Changing Behavior of the Term Structure of Interest Rates
-
Do We Reject Too Often? Small Sample Properties of Tests of Rational Expectations Models
-
Drawing Inferences from Statistics Based on Multi-Year Asset Returns