Term Structure of Interest Rates with Regime Shifts

書誌事項

公開日
2002-10
権利情報
  • http://onlinelibrary.wiley.com/termsAndConditions#vor
DOI
  • 10.1111/0022-1082.00487
公開者
Wiley

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説明

<jats:title>ABSTRACT</jats:title><jats:p>We develop a term structure model where the short interest rate and the market price of risks are subject to discrete regime shifts. Empirical evidence from efficient method of moments estimation provides considerable support for the regime shifts model. Standard models, which include affine specifications with up to three factors, are sharply rejected in the data. Our diagnostics show that only the regime shifts model can account for the well‐documented violations of the expectations hypothesis, the observed conditional volatility, and the conditional correlation across yields. We find that regimes are intimately related to business cycles.</jats:p>

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