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The quality of public information and the term structure of interest rates

In English

Författare

  • Frederik Lundtofte

Summary, in English

This paper analyzes the term structure of interest rates in an exchange-only Lucas (Econometrica 46:1429–1445, 1978) economy where consumers learn about a stochastic growth rate through observations of the endowment process and an external public signal. We allow for deluded consumers, who exaggerate the degree of covariation between the external public signal and the growth rate. With such consumers, there can be a premium for noisy external public information in long-term bonds and the social value of more precise public information can be negative. Moreover, our model can create excessive yield volatility and deviations from the expectations hypothesis.

Publiceringsår

2013

Språk

Engelska

Sidor

715-740

Publikation/Tidskrift/Serie

Review of Quantitative Finance and Accounting

Volym

40

Issue

4

Dokumenttyp

Artikel i tidskrift

Förlag

Springer

Ämne

  • Economics

Nyckelord

  • learning
  • information quality
  • incomplete information
  • term structure of interest rates

Status

Published

ISBN/ISSN/Övrigt

  • ISSN: 0924-865X