Segmented Markets Hypothesis Flashcards
1
Q
Segmented Markets Hypothesis…
A
theory explains the term structure of interest rates as a series of preference zones which certain investors select depending on term to maturity.
2
Q
Demand and supply…
A
determine the position of the curve
3
Q
problem 1
A
if the demand by one group of investors (say in short-bonds) is stronger than the other (say in long-bonds) the shape of the yield curve will eventually change.
4
Q
problem 2
A
the supply for bonds with specific maturities may be problematic.
5
Q
problem 3
A
investors may be forced to “buy and sell” strategies instead of “buy and hold” ones.
6
Q
theory is…
A
unrealistic in its pure form
