The Term Structure of Interest Rates and the Economic Value of its Predictability in the UK

摘要: The term structure of interest rates describes the relationship between shortand long-term and embeds market’s expectation future rates. This has led to a large literature concerned with modelling hence attempting extract this information. thesis is both forecasting UK structure, focus on application density decision-based forecast evaluation. We test Expectations Hypothesis more generally, examine if best described by statistical or theory informed model. Interest rate forecasts are essential for policymakers practitioners alike. Since provide entire distribution about forecast, we argue that they appropriate an investor uncertainties asset returns. …nd economic have explanatory power money market be consistent Hypothesis. Further, demonstrate how techniques can applied returns inform portfolio allocation decisions; these optimal allocations sensitive expected assumptions made regarding return predictability. Furthermore, given importance evaluation, our results highlight need judge in decision making context which ultimately intended. That is, …ndings advocate use criteria assess from user’s perspective, i.e. terms value, rather than conventional measures. Under methods, may gain wealth assuming predictable using model forecast. In short, signi…cant structure.