The Term Structure of Interest Rates in India

49 Pages Posted: 1 Mar 2016

See all articles by Rajnish Mehra

Rajnish Mehra

Arizona State University (ASU) - W.P Carey School of Business, Department of Economics; National Bureau of Economic Research (NBER)

Arunima Sinha

Fordham University

Multiple version iconThere are 2 versions of this paper

Date Written: February 2016

Abstract

We examine the term structure of interest rates in India to see if the yield curve can be rationalized based on the ‘expectations hypothesis’. Although we find evidence of predictability for holding period returns, we reject the null hypothesis that the expectations hypothesis holds for the period under consideration. Contrary to the finding in the US, the volatility of Indian bond returns is consistent with the expectations hypothesis. Returns on long-term bonds are less volatile than those of short-term bonds. The volatility puzzle documented by Shiller on US data is not observed in Indian bond returns.

Suggested Citation

Mehra, Rajnish and Sinha, Arunima, The Term Structure of Interest Rates in India (February 2016). NBER Working Paper No. w22020. Available at SSRN: https://ssrn.com/abstract=2739546

Rajnish Mehra (Contact Author)

Arizona State University (ASU) - W.P Carey School of Business, Department of Economics ( email )

Tempe, AZ 85287-3806
United States
480 965 6335 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Arunima Sinha

Fordham University ( email )

Bronx, NY 10458
United States

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