Empirical studies show that the Fisher Effect works best for short-term securities.

Question

Quizplus · Accepted Answer

Empirical studies have shown that the Fisher Effect, which suggests that nominal interest rates adjust to changes in expected inflation rates, works better for short-term securities compared to long-term securities. This is because long-term securities are subject to more uncertainty and variability in expected inflation rates, which can affect investors' willingness to hold onto them over a longer time horizon.

Empirical Studies Show That the Fisher Effect Works Best for Short-Term