The expectation hypothesis of the term structure of very short-term rates
Subtitle: statistical tests and economic value
By: byPasquale Della Corte, Lucio Sarno, and Daniel L. Thornton
Contributors: Sarno, Lucio; Thornton, Daniel L.; Federal Reserve Bank of St. Louis
Series: Working paper -- 2006-061A; Working paper (Federal Reserve Bank of St. Louis : Online) -- 2006-061A.
Publisher: Federal Reserve Bank of St. Louis
Published: 2006
Place of publication: St. Louis, Mo.]
Language: eng
Format: [electronic resource] :
Description: "This paper re-examines the validity of the Expectation Hypothesis (EH) of the term structure of US repo rates ranging in maturity from overnight to three months.  We extend the work of Longstaff (2000) in two directions: (i) we implement statistical tests designed to increase test power in this context; (ii) we assess the economic value of departures from the EH based on criteria of profitability and economic significance.  The EH is rejected throughout the term structure examined on the basis of the statistical tests.  The results of our economic analysis are less uniform and more favorable to the EH, suggesting that the statistical rejections of the EH are not economically significant for rates with maturities of one month and longer"--Federal Reserve Bank of St. Louis web site.
Notes: Title from PDF file as viewed on 12/18/2006.

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