EconPapers    
Economics at your fingertips  
 

The Term Structure of Euromarket Interest Rates: An Empirical Investigation

John Campbell () and Richard Clarida ()

No 772R, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: This paper is an empirical investigation of the predictability and comovement of risk premia in the term structure of Euromarket interest rates. We show that variables which have been used as proxies for risk premia on uncovered foreign asset positions also predict excess returns in Euromarket term structures, while variables which have been used as proxies for risk premia in the term structure also predict excess returns on taking uncovered foreign asset positions. These findings suggest that risk premia move together. We test formally the hypothesis that risk premia on uncovered 3-month EuroDM and Eurosterling deposits move in proportion to a single latent variable. We are unable to reject this hypothesis. We are also unable to reject the hypothesis that the risk premia on these three strategies and those on rolling over 1-month Eurosterling (EuroDM) deposit move in proportion to a single latent variable. The single latent variable model can be interpreted atheoretically, as a way of characterizing the extent to which predictable asset returns "move together"; or it can be interpreted as in Hansen and Hodrick (1983) and Hodrick and Srivastava (1983) as a specialization of the ICAPM in which assets have constant betas on a single, unobservable benchmark portfolio.

Date: 1985, Revised 1986-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Published in Journal of Monetary Economics (January 1987), 19: 25-44

Downloads: (external link)
http://cowles.yale.edu/sites/default/files/files/pub/d07/d0772-r.pdf (application/pdf)

Related works:
Journal Article: The term structure of euromarket interest rates: An empirical investigation (1987) Downloads
Working Paper: The Term Structure of Euromarket Interest Rates: An Empirical Investigation (1987) Downloads
Working Paper: The Term Structure of Euromarket Interest Rates: An Empirical Investigation (1986) Downloads
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:cwl:cwldpp:772r

Ordering information: This working paper can be ordered from
Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
The price is None.

Access Statistics for this paper

More papers in Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University Yale University, Box 208281, New Haven, CT 06520-8281 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Matthew Regan ().

 
Page updated 2019-10-15
Handle: RePEc:cwl:cwldpp:772r