# Mean-variance cointegration and the expectations hypothesis

*Till Strohsal* and
*Enzo Weber*

*Quantitative Finance*, 2014, vol. 14, issue 11, 1983-1997

**Abstract:**
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 the conditional first and second moment of US bond data.

**Date:** 2014

**References:** View references in EconPapers View complete reference list from CitEc

**Citations:** View citations in EconPapers (4) Track citations by RSS feed

**Downloads:** (external link)

http://hdl.handle.net/10.1080/14697688.2013.814974 (text/html)

Access to full text is restricted to subscribers.

**Related works:**

Working Paper: Mean-Variance Cointegration and the Expectations Hypothesis (2011)

Working Paper: Mean-Variance Cointegration and the Expectations Hypothesis (2010)

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:taf:quantf:v:14:y:2014:i:11:p:1983-1997

**Ordering information:** This journal article can be ordered from

http://www.tandfonline.com/pricing/journal/RQUF20

Access Statistics for this article

Quantitative Finance is currently edited by *Michael Dempster* and *Jim Gatheral*

More articles in Quantitative Finance from Taylor & Francis Journals

Bibliographic data for series maintained by Chris Longhurst ().