Predictable changes in yields and forward rates
By: David Backus ... [et al.].
Contributors: Backus, David.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 6379; Working paper series (National Bureau of Economic Research) -- working paper no. 6379.
Publisher: National Bureau of Economic Research
Published: 1998
Place of publication: Cambridge, MA
Language: eng
Number of pages: 43
Subjects: Interest rates -- United States -- Econometric models.; Bonds -- Prices -- United States -- Econometric models.; Interest rates -- United States -- Forecasting.; Bonds -- Prices -- United States -- Forecasting.
Description: We consider the patterns in the predictability of interest rates expectations hypothesis (EH), and attempt to account for them with affine models. We make the following points: (i) Discrepancies in the data from the EH take a particularly simple form with forward rates: as theory suggests, the largest discrepancies are at short maturities. (ii) Reasonable estimates of one-factor Cox-Ingersoll-Ross models imply regressions on the opposite side of the EH than we see in the data: regression slopes are greater than one (iii) Multifactore affine models can nevertheless approximate both departures from the EH and other properties of interest rates.
Notes: "January 1998."

JEL no. E43, G12.

Includes bibliographical references (p. 22-24).

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