A Defense of Traditional Hypotheses about the Term Structure of Interest Rates
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A Defense of Traditional Hypotheses about the Term Structure of Interest Rates
| Title: | A Defense of Traditional Hypotheses about the Term Structure of Interest Rates |
| Author: | Campbell, John |
| Citation: | Campbell, John Y. 1986. A defense of traditional hypotheses about the term structure of interest rates. Journal of Finance 41(1): 183-193. |
| Full Text & Related Files: |
campbell_defensetraditional.pdf (196.8Kb; PDF) 
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| Abstract: | Expectations theories of asset returns may be interpreted either as stating that risk premia are zero or that they are constant through time. Under the former interpretation, different versions of the expectations theory of the term structure are inconsistent with one another, but I show that this does not necessarily carry over to the constant risk premium interpretation of the theory. I present a general equilibrium example in which different types of risk premium are constant through time and dependent only on maturity. Furthermore, I argue that differences among expectations theories are second-order effects of bond yield variability. I develop an approximate linearized framework for analysis of the term structure in which these differences disappear, and I test its accuracy in practice using data from the CRSP government bond tapes. |
| Published Version: | http://dx.doi.org/10.2307/2328351 |
| Terms of Use: | This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA |
| Citable link to this page: | http://nrs.harvard.edu/urn-3:HUL.InstRepos:3207698 |
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Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University
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