From 2004 to 2006, the FOMC raised the target federal funds rate by 4.25 percentage points, yet long-maturity yields and forward rates fell. We consider several possible explanations for this "conundrum." The most likely, in our view, is a fall in the term premium, probably associated with some...

We summarize the class of recursive preferences. These preferences fit naturally with recursive solution methods and hold the promise of generating new insights into familiar problems. Portfolio choice is used as an example