IDEAS home Printed from https://ideas.repec.org/a/wly/ijfiec/v24y2019i2p1017-1029.html
   My bibliography  Save this article

Expectation hypothesis and term structure anomaly

Author

Listed:
  • I‐Doun Kuo
  • Cathy Yi‐Hsuan Chen
  • Kai‐Min Huang

Abstract

Campbell and Shiller (1991) find the presence of term structure anomaly, in which the slope of the term structure predicts inconsistently to the change in yield of longer term bonds over the life of shorter term bonds during 1952–1987. Focusing on the post Campbell and Shiller period, our findings suggest that the anomaly is not only attributed to term premia but also relates to expectation errors. We found that macroeconomic surprises and irrationality from investors' behaviour are important determinants of time‐varying expectation errors. These factors are capable of explaining the rejection of the expectation hypothesis and the U.S. term structure anomaly in long‐term securities.

Suggested Citation

  • I‐Doun Kuo & Cathy Yi‐Hsuan Chen & Kai‐Min Huang, 2019. "Expectation hypothesis and term structure anomaly," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 24(2), pages 1017-1029, April.
    • Handle: RePEc:wly:ijfiec:v:24:y:2019:i:2:p:1017-1029
    DOI: 10.1002/ijfe.1703
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/ijfe.1703
    Download Restriction: no
    File URL: https://libkey.io/10.1002/ijfe.1703?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fernando Garcia Alvarado, 2022. "Detecting crisis vulnerability using yield spread interconnectedness," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 3864-3880, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:ijfiec:v:24:y:2019:i:2:p:1017-1029. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.interscience.wiley.com/jpages/1076-9307/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.