The Efficiency of the Treasury Bill Futures Market: An Analysis of Alternative Specifications

Anthony Vignola and Charles Dale

MPRA Paper from University Library of Munich, Germany

Abstract: Until the existence of financial futures, testing the determinants and the informational content of futures market prices has been difficult because of the vagaries associated with commodity markets. In the case of Treasury bill futures, the existence of an active secondary market and the resulting term structure of interest rates enables one to test alternative hypotheses about the prices of futures contracts. This study compares two alternative specifications of equilibrium futures prices, i.e., those implied by carrying charges and those derived from the unbiased expectations hypothesis of the theory of the term structure of interest rates. In general, the results show that the overnight cost-of-carry model is better for explaining futures prices than are forward rates derived from the yield curve.

Keywords: Futures Markets; Hedging; Treasury Bill Futures (search for similar items in EconPapers)
JEL-codes: G11 G13 G14 (search for similar items in EconPapers)
Date: 1980
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Citations: View citations in EconPapers (8)

Published in Journal of Financial Research 2.3(1980): pp. 169-188

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:48812

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