Premium
TIME‐TO‐BUILD EFFECTS AND THE TERM STRUCTURE
Author(s) -
Strauss Jack,
Zhou Guofu
Publication year - 1995
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1995.tb00215.x
Subject(s) - term (time) , econometrics , predictive power , yield curve , economics , stock (firearms) , interest rate , financial economics , monetary economics , engineering , mechanical engineering , philosophy , physics , epistemology , quantum mechanics
This paper shows that real macroeconomic variables have power to predict movements in the term structure of interest rates. This complements recent evidence that links the term structure to expected stock returns. We find that up to 86 percent of the variation in the term premia are due to the changes in macroeconomic variables. The predictive power can be attributed to the time‐to‐build effect of investments.