Sarno, Lucio; Thornton, Daniel L; Valente, Giorgio - C.E.P.R. Discussion Papers - 2005
This paper tests the expectations hypothesis (EH) using US monthly data for bond yields spanning the 1952-2003 sample period and ranging in maturity from 1 month to 10 years. We apply the Lagrange multiplier test developed by Bekaert and Hodrick (2001) and extend it to increase the test power:...