The expectation hypothesis of the term structure of very short-term rates: Statistical tests and economic value

• 成果类型: Article; Proceedings Paper
• 署名作者: Della Corte, Pasquale; Sarno, Lucio; Thornton, Daniel L.
• 署名单位: University of Warwick; AXA Group; Centre for Economic Policy Research - UK; Federal Reserve System - USA; Federal Reserve Bank - St. Louis
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2007.08.002
• 发表日期: 2008
• 页码: 158-174
• 关键词: expectation hypothesis; term structure of interest rates; vector autoregression; ECONOMIC VALUE

摘要

This paper reexamines the validity of the expectation hypothesis (EH) of the term structure of US repo rates ranging in maturity from overnight to 3 months. We extend the work of Longstaff [2000b. The term Structure of very short term rates: new evidence for the expectations hypothesis. journal of Financial Economics 58, 397-415] in two directions: (1) we implement statistical tests designed to increase test power in this context; (2) more important, we assess the economic value of departures from the EH based on criteria of profitability and economic significance in the context of a simple trading strategy. The EH is rejected throughout the term structure examined on the basis of the statistical tests. However, the results Of Our economic analysis are favorable to the EH, suggesting that the statistical rejections of the EH in the repo market are economically insignificant. (C) 2008 Elsevier B.V. All rights reserved.