Structure of Interest Rate in India

Authors: Anil Kumar

Country: India

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Abstract: In this paper an attempt is made to examines the term structure of interest rates in India. We want to ascertain whether the yield curve can be rationalized based on the ‘expectations hypothesis’. Although we find evidence of predictability for holding period returns, we reject the null hypothesis that the expectations hypothesis holds for the period under consideration. Contrary to the finding in the US, the volatility of Indian bond returns is consistent with the expectations hypothesis. Returns on long-term bonds are less volatile than those of short-term bonds. The volatility puzzle documented by Shiller on US data is not observed in Indian bond returns.

Keywords: Expectations Hypothesis, Structure of Interest Rate, Indian Bond Return, Volatility Puzzle

Paper Id: 1637

Published On: 2016-07-26

Published In: Volume 4, Issue 4, July-August 2016

Cite This: Structure of Interest Rate in India - Anil Kumar - IJIRMPS Volume 4, Issue 4, July-August 2016.

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