NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Expectations, Surprises and Treasury Bill Rates: 1960-82

Patric H. Hendershott

NBER Working Paper No. 1268 (Also Reprint No. r0540)
Issued in 1984
NBER Program(s):   ME

Changes in six-month bill rates over semiannual periods in the 1960s and 1970s are successfully related to expected changes and to surprises. The latter include unanticipated changes in expected inflation, in the growth of industrial production and base money, and in inflation uncertainty. Estimation of the basic equation through the middle of 1983 does not suggest anychange in structure. Moreover the equation "explains" 60 percent of the extraordinarily high level of real rates since late 1980, largely owing to an excess of unexpected net increases in anticipated inflation over actualin creases.Our estimates provide some support for the expectations theory; there appears to be information content in six-month forward rates. While this content is swamped by the impact of surprises in equations explaining rate changes in terms of forward rates alone, the content is clear when proxies for the surprises are included in the equations.

download in pdf format
   (207 K)

email paper

This paper is available as PDF (207 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w1268

Published: Hendershott, Patric H. "Expectations, Surprises and Treasury Bill Rates: 1960-82. "The Journal of Finance, Vol. 39, No. 3, (July 1984), pp. 685-696 .

 
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