Long Maturity Forward Rates
33 Pages Posted: 20 Sep 2001
Date Written: October 22, 2001
Abstract
The paper aims to improve the knowledge of the empirical properties of the long maturity region of the forward rate curve. Firstly, the theoretical negative correlation between the slope at the long end of the forward rate curve and the term structure variance is recovered empirically and found to be statistically significant. Secondly, the expectations hypothesis is analyzed for the long maturity region of the forward rate curve using "forward rate" regressions. The expectations hypothesis is numerically close to being accepted but is statistically rejected. The findings provide mixed support for the affine term structure model.
Keywords: Expectations Hypothesis, Forward Rate Curve, Long Maturity, Volatility
JEL Classification: G10, G12, G14
Suggested Citation: Suggested Citation
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