TY  - JOUR
AU  - Backus,David
AU  - Foresi,Silverio
AU  - Mozumdar,Abon
AU  - Wu,Liuren
TI  - Predictable Changes in Yields and Forward Rates
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6379
PY  - 1998
Y2  - January 1998
UR  - http://www.nber.org/papers/w6379
L1  - http://www.nber.org/papers/w6379.pdf
N1  - Author contact info:
David Backus
Stern School of Business
NYU
44 West 4th Street
New York, NY 10012-1126
Tel: 212/998-0873
Fax: 212/995-4221
E-Mail: dbackus@stern.nyu.edu

Silverio Foresi
Salomon Smith Barney
Emerging Markets Derivatives and
Structured Products
388 Greenwich Street
11th Floor
New York, NY  10013

Liuren Wu
Zicklin School of Business
Baruch College
Box B10-225
New York, NY  10010
E-Mail: liuren_wu@baruch.cuny.edu
AB  - We consider the patterns in the predictability of interest rates expectations hypothesis (EH), and attempt to account for them with affine models.  We make the following points: (i) Discrepancies in the data from the EH take a particularly simple form with forward rates: as theory suggests, the largest discrepancies are at short maturities.  (ii) Reasonable estimates of one-factor Cox-Ingersoll-Ross models imply regressions on the opposite side of the EH than we see in the data: regression slopes are greater than one (iii) Multifactore affine models can nevertheless approximate both departures from the EH and other properties of interest rates.
ER  -