The Term Structure of Euromarket Interest Rates: An Empirical Investigation
John Campbell () and
Richard Clarida ()
No 1946, NBER Working Papers from National Bureau of Economic Research, Inc
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 Euroniarket 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 suggests that risk premia in the Euromarket term structures and on uncovered foreign asset positions 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) deposits versus holding a 3-month Eurosterlirig (EuroDN) 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.
Note: ME ITI IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23) Track citations by RSS feed
Published as Campbell, John Y. and Richard H. Clarida. "The Term Structure of Euromarket Interest Rates: An Empirical Investigation," Journal of Monetary Economics, Vol. 19, No. 1, (January 1987), pp. 25-44.
Downloads: (external link)
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 (1987)
Working Paper: The Term Structure of Euromarket Interest Rates: An Empirical Investigation (1986)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:1946
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().