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Risk Premia and Long Rates in Ireland

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  • Bredin, Don

    (Central Bank and Financial Services Authority of Ireland)

  • Cuthbertson, Keith

    (Imperial College, London)

Abstract

Using a number of long-term maturities and monthly data, 1989-1997, we provide a number of tests of the expectations hypothesis (EH) of the term structure. The main insight in this paper is the use of the excess holding period return to provide a proxy for a possible time varying term premium. Nearly all previous studies using the VAR methodology have used only the spread and the change in (short) rates and they have ignored the excess holding period return. Our results are consistent with recent evidence for the UK (Cuthbertson and Nitzsche, 1998), in that we cannot reject the EH. However we do reject the presence of a time varying risk premia.

Suggested Citation

  • Bredin, Don & Cuthbertson, Keith, 2000. "Risk Premia and Long Rates in Ireland," Research Technical Papers 2/RT/00, Central Bank of Ireland.
    • Handle: RePEc:cbi:wpaper:2/rt/00
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    2. Bredin, Don, 2001. "Alternative Tests of the Expectations Hypothesis of the Term Structure of Interest Rates," Research Technical Papers 2/RT/01, Central Bank of Ireland.

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