Publication: Yield Spreads and Interest Rate Movements: A Bird's Eye View
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Date
1991
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Blackwell Publishing
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Campbell, John Y., and Robert J. Shiller. 1991. Yield spreads and interest rate movements: a bird's eye view, in The Econometrics of Financial Markets, special issue, Review of Economic Studies 58, no. 3: 495-514.
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Abstract
This paper examines postwar U.S. term structure data and finds that for almost any combination of maturities between one month and ten years, a high yield spread between a longer-term and a shorter-term interest rate forecasts rising shorter-term interest rates over the long term, but a declining yield on the longer-term bond over the short term. This pattern is inconsistent with the expectations theory of the term structure, but is consistent with a model in which the spread is proportional to the value implied by the expectations theory.
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