Publication Type
Journal Article
Version
publishedVersion
Publication Date
3-1997
Abstract
Based on a market efficiency assumption, we use variance decomposition analysis is to separate information in the term structure on expected future spot rates from information on time-varying term premia and to examine the market's ability to forecast both future rate changes and excess returns on long versus short securities. We find that fluctuations in the slope of the yield curve are due more to changing term premia than to fluctuations in expected future spot rates and that the market correctly predicts about 40 percent of the month-to-month changes in spot rates, a considerably higher percentage than that found by previous studies.
Discipline
Business | Finance and Financial Management
Research Areas
Finance
Publication
Journal of Financial Research
Volume
20
Issue
1
First Page
71
Last Page
91
ISSN
0270-2592
Identifier
10.1111/j.1475-6803.1997.tb00237.x
Publisher
Wiley
Citation
EDERINGTON, Louis H. and GOH, Jeremy C..
A Variance Decomposition Analysis of the Information in the Term Structure. (1997). Journal of Financial Research. 20, (1), 71-91.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/1272
Copyright Owner and License
Publisher
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1111/j.1475-6803.1997.tb00237.x