Term structure of interest rates with regime shifts
Publication
, Journal Article
Bansal, R; Zhou, H
Published in: Journal of Finance
January 1, 2002
We develop a term structure model where the short interest rate and the market price of risks are subject to discrete regime shifts. Empirical evidence from efficient method of moments estimation provides considerable support for the regime shifts model. Standard models, which include affine specifications with up to three factors, are sharply rejected in the data. Our diagnostics show that only the regime shifts model can account for the well-documented violations of the expectations hypothesis, the observed conditional volatility, and the conditional correlation across yields. We find that regimes are intimately related to business cycles.
Duke Scholars
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Published In
Journal of Finance
DOI
ISSN
0022-1082
Publication Date
January 1, 2002
Volume
57
Issue
5
Start / End Page
1997 / 2043
Related Subject Headings
- Finance
- 3801 Applied economics
- 3502 Banking, finance and investment
- 1502 Banking, Finance and Investment
Citation
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Chicago
ICMJE
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Bansal, R., & Zhou, H. (2002). Term structure of interest rates with regime shifts. Journal of Finance, 57(5), 1997–2043. https://doi.org/10.1111/0022-1082.00487
Bansal, R., and H. Zhou. “Term structure of interest rates with regime shifts.” Journal of Finance 57, no. 5 (January 1, 2002): 1997–2043. https://doi.org/10.1111/0022-1082.00487.
Bansal R, Zhou H. Term structure of interest rates with regime shifts. Journal of Finance. 2002 Jan 1;57(5):1997–2043.
Bansal, R., and H. Zhou. “Term structure of interest rates with regime shifts.” Journal of Finance, vol. 57, no. 5, Jan. 2002, pp. 1997–2043. Scopus, doi:10.1111/0022-1082.00487.
Bansal R, Zhou H. Term structure of interest rates with regime shifts. Journal of Finance. 2002 Jan 1;57(5):1997–2043.
Published In
Journal of Finance
DOI
ISSN
0022-1082
Publication Date
January 1, 2002
Volume
57
Issue
5
Start / End Page
1997 / 2043
Related Subject Headings
- Finance
- 3801 Applied economics
- 3502 Banking, finance and investment
- 1502 Banking, Finance and Investment