## Do Long-term Interest Rates Overreact to Short-term Interest Rates? |

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alternative hypothesis alternative model Asset behavior class of hypotheses current short rate data sets different maturities entire sample equivalent estimate equation Etrt+1 examine excess sensitivity hypothesis excess sensitivity model Exchange Rate expectations hypothesis expectations theory expected future short failure financial markets fluctuations forecasting future short future short rates Gregory Mankiw holding return Interest Rates Overreact investors Lawrence H least squares long bond long-term bonds long-term interest rates market expectation model of overreaction Monetary Policy NBER Working Paper null hypothesis partly myopic period premia profit opportunities RaaJ Kumar rate in forecasting rational expectations regression 2.1 regression test risk premium Robert Robert Shiller root mean squared rt+1 rt+l Sanjoy Basu Shiller Short-Term Interest Rates six-month bills spread Standard errors Stanley Fischer Stiglitz structure of interest subsample subsection suggest tations theory term structure three-month and six-month three-month Treasury bills Treasury bills twenty-year bonds two-period Var(Rt variance weighted least squares yield curve