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A1126
Title: The expectation hypothesis of the term structure of very short-term rates: Evidence from a new testing approach Authors:  Vanessa Gunnella - University of Bologna (Italy) [presenting]
Abstract: The purpose is to empirically test the Expectation Hypothesis (EH) of the term structure of the US repurchasing agreements (repo) rates, considered in a Vector Autoregression (VAR) model. A multiple hypotheses approach is adopted, in order to jointly test all the statistical hypotheses implied by the EH, i.e. the long-run and short-run implications of the theory. Furthermore, the testing procedures are carried out by taking into account heteroskedasticity through bootstrap inference, White correction and rolling windows analysis. Differently from previous results, overall evidence in favor of the statistical non-rejection of the EH is found. In particular, the rolling window analysis clarifies that the EH has been rejected only during periods of turmoil of the financial/repo markets.