The dynamic behavior of the term structure of interest rates is difficult to replicate with models, and even models with a proven track record of empirical performance have underperformed since the early 2000s. On the other hand, survey expectations are accurate predictors of yields, but only...

The unbiased expectations hypothesis states that forward rates are unbiased estimates for future short rates. Cox, Ingersoll and Ross [1] conjectured that this hypothesis should be inconsistent with the absence of arbitrage possibilities. Using the framework of Heath, Jarrow and Morton [4] we...

Previous macro-finance term structure models (MTSMs) imply that macroeconomic state variables are spanned by (i.e., perfectly correlated with) model-implied bond yields. However, this theoretical implication appears inconsistent with regressions showing that much macroeconomic variation is...