TY  - JOUR
AU  - Engle,Robert F.
AU  - Ng,Victor K.
TI  - Time-Varying Volatility and the Dynamic Behavior of the Term Structure
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3682
PY  - 1991
Y2  - April 1991
UR  - http://www.nber.org/papers/w3682
L1  - http://www.nber.org/papers/w3682.pdf
N1  - Author contact info:
Robert F. Engle, III
Department of Finance, Stern School of Business
New York University, Salomon Center
44 West 4th Street, Suite 9-160
New York, NY  10012-1126
Tel: 212/998-0710
Fax: 212/995-4220
E-Mail: rengle@stern.nyu.edu

Victor Ng
Goldman Sachs
E-Mail: victor.k.ng@gs.com
AB  - In this paper, we consider a framework with which the cross sectional and time series behavior of the yield curve can be studied simultaneously. We examine the relationship between the yield curve and the time-varying conditional volatility of the Treasury bill market. We demonstrate that differently shaped yield curves can result given different combinations of volatility and expectations about future spot rates. Moreover, adjusting the forward rate for the volatility related liquidity premium can improve its performance as a predictor of future spot rates at least for the period from August 1964 to August 1979.
ER  -