Real risk, inflation risk, and the term structure

Economic Journal

Volumn 113, Issue 487, 2003, Pages 345-389

  Evans, Martin D D ^a  

^a GEORGETOWN UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

INTEREST RATE; MODELING; RISK FACTOR;

UNITED KINGDOM;

EID: 0037985370     PISSN: 00130133     EISSN: None     Source Type: Journal    
DOI: 10.1111/1468-0297.00130     Document Type: Article

References (51)

1. Ait-Sahalia, Y. (1996). 'Testing continuous-time models of the spot interest rate', Review of Financial Studies, vol. 9, pp. 385-426.
2. Ang, A. and Bekaert, G. (1998). 'Regime switches in interest rates', working paper, Stanford University.
3. Arak, M. and Kreichner, L. (1985). 'The real rate of interest: inferences from the new UK indexed gilts', International Economic Review, vol. 26, pp. 399-408.
4. Backus, D., Foresi, S., Mozummdar A. and Wu, L. (1997). 'Predictable changes in yields and forward rates', manuscript, Stern School of Business, NYU.
5. Bansal, R. and Zhou, H. (2002). 'Term structure of interest rates with regime shifts', Journal of Finance, (forthcoming).
6. Barr, D. and Campbell, J. (1997). 'Inflation, real interest rates, and the bond market: a study of UK nominal and index-linked government bond prices', Journal Monetary Economics, vol. 39, pp. 361-83.
7. Barr, D. and Pesaran, B. (1995). 'An assessment of the relative importance of real interest rates, inflation and term premia in determining the prices of real and nominal UK bonds', working paper no. 32, Bank of England.
8. Bekaert, G., Hodrick, R. and Marshall, D. (1997). 'On biases in tests of the expectations hypothesis of the term structure of interest rates', Journal of Financial Economics, vol. 44, pp. 309-48.
9. Bekaert, G., Hodrick, R. and Marshall, D. (2001). 'Peso problem explanations for term structure anomalies', Journal of Monetary Economics, vol. 48, pp. 241-70.
10. Brown, R. and Schaefer, S. (1995). 'The term structure of real interest rates and the Cox, Ingersol and Ross model', Journal of Financial Economics, vol. 35, pp. 3-24.
11. Campbell, J. (1995). 'Some lessons from the yield curve', Journal of Economic Perspectives, vol. 9, pp. 129-52.
12. Campbell, J., Lo, A. and MacKinlay, A. (1997). The Econometrics of Financial Markets, Princeton NJ: Princeton University Press.
13. Campbell, J. and Shiller, R. (1991). 'Yield spreads and interest rate movements: a bird's eye view', Review of Economic Studies, vol. 58, pp. 495-514.
14. Campbell, J., and Viceira, L. (2001). 'Who should buy long-term bonds?', American Economic Review, vol. 91, pp. 99-127.
15. Conley, T., Hansen, L., Luttmer, E., and Scheinkman, J. (1997). 'Short-term interest rates as subordinated diffusions', Review of Financial Studies, vol. 10, pp. 525-77.
16. Cox, J., Ingersoll, J. and Ross, S. (1985). 'A theory of the term structure of interest rates', Econometrica, vol. 53, pp. 363-84.
17. Dai, Q. and Singleton, K. (2000). 'Expectation puzzles, time-varying risk premia, and dynamic models of the term structure', NBER working paper no. 8167.
18. Deacon, M. and Derry, A. (1994). 'Estimating the term structure of interest rates', working paper no. 24, Bank of England.
19. Duffee, G. (1998). 'Term premia and interest rate forecasts in affine models', manuscript, Haas School of Business, UC Berkeley.
20. Duffie, D. (1992). Dynamic Asset Pricing Theory, Princeton NJ: Princeton University Press.
21. Engel, C. and Hamilton J. (1990). 'Long swings in the dollar: are they in the data and do markets know it?', American Economic Review, vol. 80, pp. 689-713.
22. Evans, M. (1998a). 'Real rates, expected inflation, and inflation risk premia', Journal of Finance, vol. 53, pp. 187-218.
23. Evans, M. (1998b). 'Dividend variability and stock market swings', Review of Economic Studies, vol. 65, pp. 711-40.
24. Evans, M. and Lewis, K. (1994). 'Do stationary risk premia explain it all? Evidence from the term structure', Journal of Monetary Economics, vol 33, pp. 285-318.
25. Evans, M., and Lewis, K. (1995). 'Do inflation expectations affect the real rate?, Journal of Finance, vol. 50, pp. 225-53.
26. Fama, E. (1990). 'Term structure forecasts of interest rates, inflation, and real returns', Journal of Monetary Economics, vol. 25, pp. 269-82.
27. Fisher, I. (1930). The Theory of Interest, New York: Macmillan.
28. Fisher, M. and Gilles, C. (1996). 'Term premia in exponential-affine models of the term structure', manuscript, Board of Governors of the Federal Reserve System.
29. Foresi, S., Penati, A. and Pennacchi, G. (1996). 'Estimating the cost of US indexed bonds', manuscript, Stern School of Business, NYU.
30. Gallant, A. (1977). 'Testing a nonlinear regression specification: a nonregular case', Journal of the American Statistical Association, vol. 72, pp. 523-30.
31. Garcia, R. and Perron, P. (1996). 'An analysis of the real interest rate under regime shifts', The Review of Economics and Statistics, vol. 78, pp. 111-25.
32. Gong, F., and Remolona, E. (1996). 'Inflation risk in the U.S. yield curve: the usefulness of indexed bonds', manuscript, Federal Reserve Bank of New York.
33. Hamilton, J. (1988). 'Rational expectations analysis of changes in regimes: an investigation of the term structure of interest rates', Journal of Economic Dynamics and Control, vol. 12, pp. 385-423.
34. Hamilton, J. (1994). Time Series Analysis, Princeton NJ: Princeton University Press.
35. Hansen, B. (1992). 'The likelihood ratio test under nonstandard conditions: testing the Markov switching model of GNP', Journal of Applied Econometrics, vol. 7, pp. 61-82.
36. Hansen, L. (1982). 'Large sample properties of generalized method of moments estimators', Econometrica, vol. 50, pp. 1029-54.
37. Kim, C. (1994). 'Dynamic linear models with Markov-switching', Journal of Econometrics, vol. 60, pp. 1-22.
38. Mishkin, F. (1990). 'What does the term structure tell us about future inflation?', Journal of Monetary Economics, vol. 25, pp. 77-95.
39. Naik, V. and Lee, M. (1994). 'The yield curve and bond option prices with discrete shifts in economic regimes', manuscript, University of British Columbia.
40. Newey, W. and West, K. (1987). 'A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix', Econometrica, vol. 55, pp. 703-8.
41. Pearson, N. and Sun, T-S. (1991). 'An empirical examination of the Cox, Ingersoll, Ross model of the term structure of interest rates', manuscript, University of Rochester and Columbia University.
42. Pennacchi, G. (1991). 'Identifying the dynamics of real interest rates and inflation: Evidence using survey data', Review of Financial Studies, vol. 4, pp. 53-86.
43. Roberds, W. and Whiteman, C. (1999). 'Endogenous term premia and anomalies in the term structure of interest rates: explaining the predictability smile', Journal of Monetary Economics, vol. 44, pp. 555-80.
44. Remolona, E., Wickens, M. and Gong, F. (1996). 'What was the market's view of UK monetary policy? Estimating inflation risk and expected inflation with indexed bonds', manuscript, University of York.
45. Sola, M. and Driffill, J. (1994). 'Testing the term structure of interest rates using a vector autoregression with regime switching', Journal of Economic Dynamics and Control, vol. 18, pp. 601-28.
46. Stanton, R. (1997). 'A nonparametric model of term structure dynamics and the market price of interest rate risk', Journal of Finance, vol. 52, pp. 1973-2002.
47. Steeley, J. (1997). 'A two-factor model of the UK yield curve', The Manchester School, Supplement, vol. 65, pp. 32-58.
48. Steeley, J. (2000). 'Endogenous time-varying risk premia in the gilt-edged market', manuscript, University of Stirling.
49. Sun, T-S. (1992). 'Real and nominal interest rates: a discrete-time model and its continuous-time limit', Review of Financial Studies, vol. 5, pp. 581-611.
50. Travalis, E. and Wickens, M. (1996). 'Forecasting inflation from the term structure', Journal of Empirical Finance, vol. 3, pp. 103-22.
51. Vasicek, O. (1977). 'An equilibrium characterization of the term structure', Journal of Financial Economics, vol. 5, pp. 177-88.