Do Long Interest Rates Ever Fall?

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

19 Pages Posted: 23 Jul 2014

See all articles by Bradford D. Jordan

Bradford D. Jordan

University of Florida; University of Florida - Department of Finance, Insurance and Real Estate

Susan D. Jordan

University of Kentucky - Finance

Joe Smolira

Belmont University

Denver Travis

Loyola University New Orleans - College of Business

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, 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 D. Jordan (Contact Author)

University of Florida ( email )

Gainesville, FL 32611
United States

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

Susan D. 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

Loyola University New Orleans - College of Business

6363 St. Charles Avenue
New Orleans, LA 70118
United States

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