Which theory of term structure argues that individual investors have specific maturity preferences?
A)The unbiased expectations theory.
B)The liquidity premium theory.
C)The loanable funds theory.
D)The market segmentation theory.
E)None of the above.

Question

Quizplus · Accepted Answer

The market segmentation theory argues that different investors have specific maturity preferences, which creates separate markets for different maturity securities. As a result, interest rates for each segment of the market are determined separately, rather than being based on an overall market view. This theory suggests that investors are segmented based on factors such as risk tolerance, tax status, and investment objectives.

Which Theory of Term Structure Argues That Individual Investors Have