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Topic
Publication year
Speculation and the Term Structure of Interest Rates
Resource type
Authors/contributors
- Barillas, Francisco (Author)
- Nimark, Kristoffer P. (Author)
Title
Speculation and the Term Structure of Interest Rates
Abstract
We develop and estimate a tractable equilibrium term structure model populated with rational but heterogeneously informed traders that take on speculative positions to exploit what they perceive to be inaccurate market expectations about future bond prices. The speculative motive is an important driver of trading volume. Yield dynamics due to speculation are (1) statistically distinct from classical term structure components due to risk premiums and expectations about future short rates and are orthogonal to public information available to traders in real time and (2) quantitatively important, accounting for a substantial fraction of the variation of long maturity U.S. bond yields.
Publication
Review of Financial Studies
Volume
30
Issue
11
Pages
4003-4037
Date
2017
Citation
Barillas, F., & Nimark, K. P. (2017). Speculation and the Term Structure of Interest Rates. Review of Financial Studies, 30, 4003–4037.
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