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Do Long Interest Rates Ever Fall?

Advances in Financial Planning and Forecasting, 2008, Volume 3, Pages 21-36.

19 Pages Posted: 23 Jul 2014  

Bradford D. Jordan

University of Kentucky - Gatton College of Business and Economics

Susan D. Jordan

University of Kentucky - Finance

Joe Smolira

Belmont University

Denver H. Travis

Saint Joseph's University

Date Written: March 1, 2006

Abstract

Theoretical considerations in Dybvig, Ingersoll, and Ross (1996) lead them to conclude that long forward and zero-coupon rates can never fall. We examine this conjecture empirically using monthly U.S. Treasury STRIPS data over the period 1990-2000. Based on the Cox, Ingersoll, and Ross (1985) term structure model and a constant-drift adaptation of that model, we find that, contrary to predictions, implied long maturity zero-coupon rates did fall substantially during the last half of this period.

Keywords: Term Structure, Treasury STRIPS

Suggested Citation

Jordan, Bradford D. and Jordan, Susan D. and Smolira, Joe and Travis, Denver H., Do Long Interest Rates Ever Fall? (March 1, 2006). Advances in Financial Planning and Forecasting, 2008, Volume 3, Pages 21-36.. Available at SSRN: https://ssrn.com/abstract=2469343

Bradford Jordan (Contact Author)

University of Kentucky - Gatton College of Business and Economics ( email )

550 South Limestone
Lexington, KY 40506
United States
859-257-4887 (Phone)
859-257-9688 (Fax)

Susan Jordan

University of Kentucky - Finance ( email )

Gatton College of Business & Economics
University of Kentucky
Lexington, KY 40506-0034
United States
859-257-1626 (Phone)

Joe Smolira

Belmont University ( email )

United States
615-460-6463 (Phone)

HOME PAGE: http://coba.belmont.edu/fac/smoliraj/

Denver Travis

Saint Joseph's University ( email )

Philadelphia, PA 19131
United States
610-660-1670 (Phone)

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