Fractional cointegration in US term spreads
This article examines the stochastic properties of US term spreads with parametric and semi-parametric fractional integration techniques. Since the observed data (rather than the estimated residuals from a cointegrating regression) are used for the analysis, standard methods can be applied. The results indicate that US Treasury maturity rates are <italic>I</italic>(1) in most cases, although the order of integration decreases with maturity. Furthermore, mean reversion occurs for the 5-, 7- and 10-year rates as well as for several term spreads, suggesting that the expectation hypothesis of the term structure is supported empirically in these cases.
Year of publication: |
2012
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Authors: | Caporale, Guglielmo Maria ; Gil-Alana, Luis Alberiko |
Published in: |
Applied Economics Letters. - Taylor & Francis Journals, ISSN 1350-4851. - Vol. 19.2012, 5, p. 431-434
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Publisher: |
Taylor & Francis Journals |
Saved in:
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