Web www.software-risk.co.uk

Theories of the term structure of interest rates, which include the pure expectations theory; the liquidity theory of the term structure, and the preferred habitat theory. These theories hold that each forward rate equals the expected future interest rate for the relevant period. These three theories differ, however, on whether other factors also affect forward rates, and how.

Copyright © 2005, Campbell R. Harvey. All Worldwide Rights Reserved. Do not reproduce without explicit permission.

Related Articles
Why Bring Back the 30-Year Bond?
Tilted portfolio
Preferred habitat theory
Interest rate risk
Fisher effect
Elliott Wave Theory
Efficient markets theory (EMT)
Efficient Market Hypothesis

Similar Areas

Finance Items

Selected Books

Keywords

Expectations hypothesis theories

expectations

hypothesis

theory

term structure

interest rates

liquidity theory

preferred habitat theory

theories