Mean-variance cointegration and the expectations hypothesis

Arbeitspapier

The present paper sheds further light on a well-known (alleged) violation of the expectations hypothesis of the term structure (EHT) - the frequent finding of unit roots in interest rate spreads. We show that the EHT implies (i) that the nonstationarity stems from the holding premium, which is hence (ii) cointegrated with the spread. In a stochastic discount factor framework we model the premium as being driven by the integrated variance of excess returns. Introducing the concept of mean-variance cointegration we actually find cointegration relations between spreads and premia in US data.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SFB 649 Discussion Paper ; No. 2011-007

Classification and Topics

• Classification: Wirtschaft ; Interest Rates: Determination, Term Structure, and Effects ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
• Subject: expectations hypothesis ; holding premium ; persistence ; cointegration ; GARCH ; Zinsstrukturtheorie ; Risikoprämie ; Kointegration ; ARCH-Modell ; Schätzung ; USA

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Strohsal, Till ; Weber, Enzo
• Event: Veröffentlichung
• (who): Humboldt University of Berlin, Collaborative Research Center 649 - Economic Risk
• (where): Berlin
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/56672
• Last update: 10.03.2025, 11:42 AM CET