Abstract
Models which represent long-term interest rates as long averages of expected short-term interest rates imply, because of the smoothing implicit in the averaging, that long rates should not be too volatile. The volatility of actual long-term interest rates, as measured by the variance of short-term holding yields on long-term bonds, appears to exceed limits imposed by the models. Such excess volatility implies a kind of forecastability for long rates. Long rates show a slight tendency to fall when they are high relative to short rates rather than rise as predicted by expectations models.
Keywords
Volatility (finance)Term (time)EconometricsEconomicsShort rateInterest rateSmoothingBondVariance (accounting)Yield curveMathematicsStatisticsMonetary economicsPhysicsFinance
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Publication Info
- Year
- 1979
- Type
- article
- Volume
- 87
- Issue
- 6
- Pages
- 1190-1219
- Citations
- 828
- Access
- Closed
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Cite This
Robert J. Shiller
(1979).
The Volatility of Long-Term Interest Rates and Expectations Models of the Term Structure.
Journal of Political Economy
, 87
(6)
, 1190-1219.
https://doi.org/10.1086/260832
Identifiers
- DOI
- 10.1086/260832