Recent studies of the expectations hypothesis of the term structure (EHTS) find evidence in favor of the EHTS using post 1980s US data. This has been attributed to the relative macro stability of this period and greater market efficiency. Using a panel of forecasts for 3-month interest rates for...

We find evidence of heterogeneity and irrationality among professional forecasts for three-month inter-bank rates and ten-year gilt yields at both short and long forecast horizons over the period 1989–2006. The majority of biased forecasts overestimate the future spot rate, consistent with...