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Template matching prediction (TMP), which estimates the motion for a target block by using its surrounding pixels, has been observed to perform efficiently in inter-frame coding. In this paper, we expose, from a more theoretical viewpoint, the factors that determine the prediction efficiency of TMP. It is shown that the motion estimate found by template matching tends to be the motion associated with the template centroid and that TMP consistently outperforms SKIP prediction, but hardly competes with block motion compensation (BMC) unless both the motion and intensity fields are less random or have high spatial correlation. We also demonstrate how template and block motion estimates can jointly be applied in a parametric overlapped block motion compensation (OBMC) framework to further improve temporal prediction. Preliminary results show that combining TMP with OBMC can yield 2-16% reductions in mean-square prediction error, as compared with the single use of OBMC. The gain is even higher (18%) when the performance is compared with that of the standard BMC.