A Test of the Expectations Hypothesis of the Term Structure Using Cross-Section Data.

Empirical tests of the expectations hypothesis of the term structure hage almost without exception been tests of the time-series properties of interest rates. However, the expectations hypothesis has implications not just for the yield movement of a single pair of bond maturities over a number of periods but also for the relationship between yield movements of a number of bond maturities over a single period. This paper tests these implications of the expectations hypothesis using cross-section bond yield data. A long series of monthly cross-section regressions is estimated using zero coupon bond yields for maturities from two months to thirty-five years.