What does the yield curve imply about investor expectations?

Eric Gaus and Arunima Sinha

Journal of Macroeconomics, 2018, vol. 57, issue C, 248-265

Abstract: We use daily data to model investors’ expectations of U.S. yields, at different maturities and forecast horizons. We consider two adaptive learning algorithms to characterize the conditional yield forecasts. Our framework yields the first empirical estimates of the pace of learning by investors. The superior performance of the endogenous learning mechanism suggests that investors account for structural change and respond to significant, persistent deviations by modifying the amount of information they use. Our results provide strong empirical motivation to use the class of adaptive learning models considered here for modeling and analyzing expectation formation by investors.

Keywords: Adaptive learning; Investor beliefs; Inflation expectations; Excess returns (search for similar items in EconPapers)
JEL-codes: C5 D83 E43 E47 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0164070417301003
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:57:y:2018:i:c:p:248-265

DOI: 10.1016/j.jmacro.2018.06.003

Access Statistics for this article

Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos

More articles in Journal of Macroeconomics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().