Question
Please answer this question with as much details as possible. This question has three parts: A) State in words, the Expectations Hypothesis of the term-structure
Please answer this question with as much details as possible.
This question has three parts:
A) State in words, the Expectations Hypothesis of the term-structure of interest rates. State in words, the pure expectations hypothesis. What do these hypothesis predict about interest-rate changes in an economy?
B) Describe how, using a simple linear regression, you could test the Expectations Hypothesis and the Pure Expectations Hypothesis. Write down the regression equation, and interpret the coefficients in the equation.
C) Do empirical tests of the expectations hypothesis of the term structure of interest rates confirm that it is correct? Discuss results obtained in tests that use both short-maturity bonds and long-maturity bonds.
a) State in words, the Expectations Hypothesis of the term-structure of interest rates. State in words, the pure expectations hypothesis. What do these hypothesis predict about interest-rate changes in an economy? b) Describe how, using a simple linear regression, you could test the Expectations Hypothesis and the Pure Expectations Hypothesis. Write down the regression equation, and interpret the coefficients in the equation. c) Do empirical tests of the expectations hypothesis of the term structure of interest rates confirm that it is correct? Discuss results obtained in tests that use both short-maturity bonds and long-maturity bonds. a) State in words, the Expectations Hypothesis of the term-structure of interest rates. State in words, the pure expectations hypothesis. What do these hypothesis predict about interest-rate changes in an economy? b) Describe how, using a simple linear regression, you could test the Expectations Hypothesis and the Pure Expectations Hypothesis. Write down the regression equation, and interpret the coefficients in the equation. c) Do empirical tests of the expectations hypothesis of the term structure of interest rates confirm that it is correct? Discuss results obtained in tests that use both short-maturity bonds and long-maturity bonds
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