Expectation hypothesis and term structure anomaly

2018 ◽  
Vol 24 (2) ◽  
pp. 1017-1029 ◽  
Author(s):  
I‐Doun Kuo ◽  
Cathy Yi‐Hsuan Chen ◽  
Kai‐Min Huang
Keyword(s):  
Term Structure ◽  
Expectation Hypothesis

scholarly journals Some Lessons from the Yield Curve

1995 ◽  
Vol 9 (3) ◽  
pp. 129-152 ◽  
Author(s):  
John Y Campbell
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Yield Curve ◽  
Bond Market ◽  
Expectations Hypothesis ◽  
Expectation Hypothesis ◽  
Maturity Structure ◽  
Short And Long Term ◽  
The U.S

This paper reviews the literature on the relation between short- and long-term interest rates. It summarizes the mixed evidence on the expectation hypothesis of the term structure: when long rates are high relative to short rates, short rates tend to rise as implied by the expectations hypothesis, but long rates tend to fall, which is contrary to the expectations hypothesis. The paper discusses the response of the U.S. bond market to shifts in monetary policy in the spring of 1994 and reviews the debate over the optimal maturity structure of the U.S. government debt.

A COMPLETE YIELD CURVE DESCRIPTION OF A MARKOV INTEREST RATE MODEL

2003 ◽  
Vol 06 (04) ◽  
pp. 317-326 ◽  
Author(s):  
ROBERT J. ELLIOTT ◽  
ROGEMAR S. MAMON
Keyword(s):  
Interest Rate ◽  
Term Structure ◽  
Yield Curve ◽  
Forward Rate ◽  
Rate Model ◽  
Bond Price ◽  
Forward Measure ◽  
Expectation Hypothesis ◽  
Complete Set ◽  
Interest Rate Model

This paper aims to present a complete term structure characterisation of a Markov interest rate model. To attain this objective, we first give a proof that establishes the Unbiased Expectation Hypothesis (UEH) via the forward measure. The UEH result is then employed, which considerably facilitates the calculation of an explicit analytic expression for the forward rate f(t, T). The specification of the bond price P(t, T), yield rate Y(t, T) and f(t, T) gives a complete set of yield curve descriptions for an interest rate market where the short rate r is a function of a continuous time Markov chain.

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