PT - JOURNAL ARTICLE AU - Xiaoxia Ye TI - A New Approach to Measuring Market Expectations and Term Premia AID - 10.3905/jfi.2015.24.4.022 DP - 2015 Mar 31 TA - The Journal of Fixed Income PG - 22--46 VI - 24 IP - 4 4099 - https://pm-research.com/content/24/4/22.short 4100 - https://pm-research.com/content/24/4/22.full AB - This article develops a novel approach for measuring market expectations and term premia in the term structure of interest rates. Key components of this approach are generic impact measures of state variables in a Gaussian dynamic term structure model. These measures are inherent in a particular state variable regardless of how other state variables are defined within the model. With the help of these measures, the approach gives rise to market expectations that predict yield changes well, and term premia with a legitimate impact on the forward curve. In my empirical analysis, I show the generic impact of the short rate on the yield curve, and present observations of the historical dynamics of market expectations and term premia. The calibrated model is also employed to study the impacts of recent unconventional monetary policies.TOPICS: Fixed income and structured finance, quantitative methods, financial crises and financial market history