TY - JOUR
AU - FELDMAN, DAVID
AB - ABSTRACT This paper investigates the term structure of interest rates in a multiperiod production and exchange economy with incomplete information. Unable to observe their stochastic investment opportunities, investors engage in dynamic Bayesian inference. This results in the endogenous identification of a more complex production function which generates a richer term structure, resembling the one that actual market prices imply. In addition, this paper introduces a characteristic function of the term structure and demonstrates that, in contrast with a fully observable economy, the widely investigated expectations hypothesis holds true only if interest rates are nonstochastic.
TI - The Term Structure of Interest Rates in a Partially Observable Economy
JF - The Journal of Finance
DO - 10.1111/j.1540-6261.1989.tb04391.x
DA - 1989-07-01
UR - https://www.deepdyve.com/lp/wiley/the-term-structure-of-interest-rates-in-a-partially-observable-economy-Vb8KBDNus2
SP - 789
VL - 44
IS - 3
DP - DeepDyve
ER -