The Monotonicity of the Term Premium: Another Look

Posted: 18 Jul 2001

See all articles by Matthew P. Richardson

Matthew P. Richardson

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER); AQR Capital Management, LLC

Paul Richardson

affiliation not provided to SSRN

Tom Smith

University of Queensland - Faculty of Business, Economics and Law; Financial Research Network (FIRN)

Abstract

This paper reexamines evidence on the monotonicity of the term premium. Using a recently developed approach for testing inequality constraints, we propose and conduct tests for whether the term premium is monotonic and reach different conclusions from those implied by individual "t- statistics" on term premiums, even under a Bonferroni-type adjustment. Our results generally support McCulloch's (1987) view that the liquidity preference hypothesis remains unrefuted.

JEL Classification: G14

Suggested Citation

Richardson, Matthew P. and Richardson, Paul and Smith, Tom M., The Monotonicity of the Term Premium: Another Look. Available at SSRN: https://ssrn.com/abstract=5920

Matthew P. Richardson (Contact Author)

New York University (NYU) - Department of Finance ( email )

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National Bureau of Economic Research (NBER)

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AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Paul Richardson

affiliation not provided to SSRN

Tom M. Smith

University of Queensland - Faculty of Business, Economics and Law ( email )

4072 Brisbane, Queensland
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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