Estimating the Term Premium: Sample Periods Matter
Abstract
Estimated risk-neutral rates from canonical affine term structure models are highly sensitive to sample periods. For example, the 5-5 forward risk-neutral rate for September 1981 can differ by 4.6 percentage points (98%) depending on whether the sample starts in 1961 or 1981. Additionally, the estimated response of this rate to high-frequency monetary policy shocks varies by a factor of three, even within the same sample for monetary policy transmission regressions. We propose that a shifting endpoint model can mitigate these issues and provide new estimates of the effects of monetary policy shocks on long-term risk-neutral rates.
Fields of Study & Subjects
Financial Reporting and Valuation Research
Capital Investment and Risk Analysis
Publication details
- Journal / source
- Journal of Financial and Quantitative Analysis
- Publisher
- Cambridge University Press (CUP)
- Pages
- 1–61
- Publication date
- 21 July 2026
- Language
- EN