The relationship between short-term and forward interest rates: a structural time-series analysis

Author: Iyer S.

Source: Applied Financial Economics, Volume 10, Number 2, 1 April 2000 , pp. 143-153(11)

Publisher: Routledge, part of the Taylor & Francis Group

Key:

- Free Content

- New Content

- Subscribed Content

- Free Trial Content

Abstract:

In this paper, the structural time-series (STS) approach is used to examine the relationship between short-term and forward interest rates on US Treasury bills and, to decompose the biased predictions of the future short rate by the forward rate, into systematic expectation errors and systematic time-varying term premiums. Results confirm many of the empirical characteristics of short and forward rates and, findings reveal that both expectation errors and time-varying expected term premiums are important in explaining the forward rate bias.

Language: English

Document Type: Research article

The full text electronic article is available for purchase. You will be able to download the full text electronic article after payment.

$38.49 plus tax Refund Policy