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Variance-in-Mean Effects of the Long Forward-Rate Slope

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  • Charlotte Christiansen, Denmark
This paper contains an empirical analysis of the dependence of the long forward-rate slope on the long-rate variance. The long forward-rate slope and the long rate are described by a bivariate GARCH-in-mean model. In accordance with theory, a negative long-rate variance-in-mean effect for the long forward-rate slope is documented. Thus, the greater the long-rate variance, the steeper the long forward-rate curve slopes downward (the long forward-rate slope is negative). The variance-in-mean effect is both statistically and economically significant.
Original languageEnglish
JournalApplied Financial Economics
Volume15
Issue11
Pages (from-to)753-755
Number of pages3
ISSN0960-3107
Publication statusPublished - 2005

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