NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Interest Rate Expectations Versus Forward Rates: Evidence From An Expectations Survey

Benjamin M. Friedman

NBER Working Paper No. 295 (Also Reprint No. r0034)
Issued in October 1978
NBER Program(s):   ME

The object of this paper is to test several familiar hypotheses about the relationship between the forward rates implied by the term structure and interest rate expectations, using the one ongoing systematic survey that samples market participants' expectations. The substitution of survey data for overidentified constructions removes the principal source of ambiguity that has plagued much of the earlier empirical literature of the term structure. Nevertheless, because of limitations in the available data, it is possible to perform these tests only for the very short end of the maturity spectrum. Section I briefly describes the nature of the interest rate expectations survey and the calculation of the forward rate series from observed term structure data. Sections II-V present the results of testing the hypotheses that the implied term premium is zero on average (II), that it varies systematically with interest rate levels (III), that it varies with outside asset supplies (IV), and that it varies with economic activity (V). Section VI summarizes the findings of these tests and discusses their implications

download in pdf format
   (183 K)

email paper

This paper is available as PDF (183 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w0295

Published: Friedman, Benjamin M. "Interest Rate Expectations Versus Forward Rates: Evidence from an Expectations Survey." The Journal of Finance, Vol. XXXIV, No . 4, (September 1979), pp. 965-973.

Users who downloaded this paper also downloaded these:
Diller Expectations in the Term Structure of Interest Rates
Froot w2363 New Hope for the Expectations Hypothesis of the Term Structure of Interest Rates
Svensson w4871 Estimating and Interpreting Forward Interest Rates: Sweden 1992 - 1994
Mankiw and Miron w1669 The Changing Behavior of the Term Structure of Interest Rates
Kessel THE APPLICATION OF THE LIQUIDITY PREFERENCE AND EXPECTATIONS HYPOTHESES TO THE CYCLICAL BEHAVIOR OF INTEREST RATES
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us