Which of the theories used to explain the shape of the yield curve in most similar to the market segmentation theory?
A) expectations theory
B) liquidity preference theory
C) preferred habitat theory
D) pecking order theory

Question

Quizplus · Accepted Answer

The preferred habitat theory is most similar to the market segmentation theory because both theories suggest that investors have specific preferences for certain maturities based on their individual needs, leading to a segmented demand for bonds of different maturities. This segmentation influences the shape of the yield curve.

Which of the Theories Used to Explain the Shape of the Yield