Idiosyncratic Variation of Treasury Bill Yields

Greg Duffee

Journal of Finance, 1996, vol. 51, issue 2, 527-51

Abstract: The author documents a dramatic increase in the importance of two types of variation in Treasury bill yields beginning in the early 1980s. The first is idiosyncratic variation in individual short-maturity (less than three months) bill yields. The second is a common component in Treasury bill yields that is not shared by yields on other instruments, such as short-maturity privately issued instruments or longer-maturity Treasury notes and bonds. Some evidence suggests the first type reflects increased market segmentation. These results have important implications for the calibration and testing of no-arbitrage term structure models and interpreting tests of the expectations hypothesis. Copyright 1996 by American Finance Association.

Date: 1996
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Working Paper: Idiosyncratic variation of Treasury bill yields (1994)
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