Skip to main content

Lund University Publications

LUND UNIVERSITY LIBRARIES

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

Lundtofte, Frederik LU (2013) In Review of Quantitative Finance and Accounting 40(4). p.715-740
Abstract
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.
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
learning, information quality, incomplete information, term structure of interest rates
in
Review of Quantitative Finance and Accounting
volume
40
issue
4
pages
715 - 740
publisher
Springer
external identifiers
  • scopus:84875651807
ISSN
0924-865X
language
English
LU publication?
yes
id
8cf90b5d-8c35-457f-9893-6b10dd3d9a06 (old id 3405487)
date added to LUP
2016-04-01 14:45:06
date last changed
2022-01-28 02:20:18
@article{8cf90b5d-8c35-457f-9893-6b10dd3d9a06,
  abstract     = {{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.}},
  author       = {{Lundtofte, Frederik}},
  issn         = {{0924-865X}},
  keywords     = {{learning; information quality; incomplete information; term structure of interest rates}},
  language     = {{eng}},
  number       = {{4}},
  pages        = {{715--740}},
  publisher    = {{Springer}},
  series       = {{Review of Quantitative Finance and Accounting}},
  title        = {{The quality of public information and the term structure of interest rates}},
  volume       = {{40}},
  year         = {{2013}},
}