Are Expectations of Short-term Interest Rates Rational?
Author InfoJuttner, D Johannes Tuckwell, Roger H Luedecke, Bernd P Abstract The paper investigates whether expectations of short-term interest rates, as measured by either the futures rate for bank bills or the implied forward rate in the spot market for such bills, are formed rationally in the Muthian sense. A feature of the approach is the explicit integration of overseas interest rate expectations. The results indicate that market participants draw on a more comprehensive information set when setting implied forward rates than when pricing futures contracts and that, as a result, there does appear to be scope for profitable arbitrage between the two markets. Copyright 1985 by Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options: 1. Check below under “Related research” whether another version of this item is available o
