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The _ theory purposes the term structure of interest rates is determined solely by the demand...

The _ theory purposes the term structure of interest rates is determined solely by the demand for and supply of securities hacking a specific maturity

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The Market Segmentation Theory purposes the term structure of interest rates is determined solely by the demand for and supply of securities for a specific maturity.

According to market segmentation theory the term structure of interest rates for a given maturity is independent from demand and supply of the securities of different maturities. It is because the investors have different preferences for the range of maturities like banks prefer short term or medium term maturities as they have deposits for short terms or medium terms and life insurance companies prefer longer term maturities because they have long term liabilities. Therefore investor’s preferences are different from each other based on their future needs.

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