Time-Varying Risk Premia in the Single European Treasury Bill Market

Nikolaos Mylonidis

European Research Studies Journal, 2006, vol. IX, issue 1-2, 65-84

Abstract: This paper investigates the validity of the expectations hypothesis (EH) with time-varying, albeit stationary, term premia in the Ecu Treasury bill market. The analysis utilises the term premium factor representation proposed by Tzavalis and Wickens (1997) and the modified VAR approach by Cuthbertson et al. (1997). The findings indicate that once time-varying term premia are accounted for, estimated models cannot reject the predictions of the EH. However, these term premia do not exhibit strong persistence. The rejection of the spread restriction for (n,m)=(26-week,13-week) may be due to a small I(1) term premium and/or a slight misalignment of investment horizons.

Keywords: Expectations hypothesis; Risk Premia; Perfect foresight regressions; VAR (search for similar items in EconPapers)
JEL-codes: C32 E43 (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.ersj.eu/repec/ers/papers/06_part_4.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ers:journl:v:ix:y:2006:i:1-2:p:65-84

Access Statistics for this article

More articles in European Research Studies Journal from European Research Studies Journal
Bibliographic data for series maintained by Marios Agiomavritis ().