Value-added information in term structure: the case of Malaysian government securities

• Main Authors: Elshareif, Elgilani Eltahir, Yusop, Zulkornain, Tan, Hui Boon
• Format: Article
• Language: English
• Published: Faculty of Economics and Management, Universiti Putra Malaysia 2008
• Online Access: http://psasir.upm.edu.my/id/eprint/689/1/bab10.pdf; http://psasir.upm.edu.my/id/eprint/689/; http://econ.upm.edu.my/ijem/vol2_no1.htm

This study empirically examines the impact of value-added information in the risk premium on the predictability of longer maturity term structure about future short-term rates in Malaysian fixed income securities market. Regardless of the absence of a time-varying risk premium in the interest rate, the Generalized Method of Moment (GMM) results suggest that there is statistical evidence to support that the longer-term spread between long-term and short-term rates does have some significant power in predicting the changes in expected future short-term rate. This implies the stability of the short-term interest rates in Malaysia.