The Term Structure of Euromarket Interest Rates: An Empirical Investigation

John Campbell and Richard Clarida

Scholarly Articles from Harvard University Department of Economics

Abstract: This paper is an empirical investigation of the predictability and co-movement of risk premia in the term structure of Euromarket interest rates. We present regression results which suggest that risk premia in three Euromarket term structures and on uncovered foreign asset positions move together. We test formally the hypothesis that these risk premia move in proportion to a single latent variable. We are unable to reject this hypothesis. The single latent variable model can be interpreted as in Hansen and Hodrick (1983) and Hodrick and Srivastava (1984) as a specialization of the ICAPM in which assets have constant betas on a single, unobservable benchmark portfolio.

Date: 1987
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Published in Journal of Monetary Economics

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Journal Article: The term structure of euromarket interest rates: An empirical investigation (1987)
Working Paper: The Term Structure of Euromarket Interest Rates: An Empirical Investigation (1986)
Working Paper: The Term Structure of Euromarket Interest Rates: An Empirical Investigation (1986)
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