Though linear projections of returns on the slope of the yield curve have contradicted the implications of the traditional expectations theory,' we show that these findings are not puzzling relative to a large class of richer dynamic term structure models. Specifically, we are able to match all...

This paper characterizes, interprets, and tests the over-identifying restrictions imposed in affine models of the term" structure. Letting r(t) = ë Y(t), where Y is an unobserved vector affine process, our analysis proceeds in three steps. First, we show that affine models can be categorized...