Tests for Jumps in Yield Spreads

Lars Winkelmann and Wenying Yao

No 24, Berlin School of Economics Discussion Papers from Berlin School of Economics

Abstract: This paper studies high-frequency econometric methods to test for a jump in the spread of bond yields. We propose a coherent inference procedure that detects a jump in the yield spread only if at least one of the two underlying bonds displays a jump. Ignoring this inherent connection by basing inference only on a univariate jump test applied to the spread tends to overestimate the number of jumps in yield spreads and puts the coherence of test results at risk. We formalize the statistical approach in the context of an intersection union test in multiple testing. We document the relevance of coherent tests and their practicability via simulations and real data examples.

Keywords: High-frequency data; jumps; sequential testing; intersection union test; term spread; break-even inflation (search for similar items in EconPapers)
JEL-codes: C12 C58 E43 E44 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2023-09-12
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Related works:
Journal Article: Tests for Jumps in Yield Spreads (2024)
Working Paper: Tests for jumps in yield spreads (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:bdp:dpaper:0024

DOI: 10.48462/opus4-5073

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