TIME‐VARYING TERM PREMIA AND THE BEHAVIOR OF FORWARD INTEREST RATE PREDICTION ERRORS

In: The journal of financial research: the journal of the Southern Finance Association and the Southwestern Finance Association, Band 20, Heft 4, S. 503-507

Abstract

AbstractIn this paper I examine the time‐varying expected term premium argument for the failure of the expectations hypothesis of the term structure of U.S. interest rates. Using an unobserved components model to estimate expected term premia from March 1951 to January 1991, I find considerable variation in estimated premia and significant persistence in their volatility over time.