The Treasury Yield Curve as a Cointegrated System

摘要: This paper examines the temporal relationship between interest rates on Treasury securities ranging in maturity from three months to 30 years. We find strong empirical support that seven selected are cointegrated, a conclusion is insensitive normalization chosen. In particular, hypothesis of noncointegration rejeeted decisively regardless rate as dependent variable cointegrating equation. To determine whether this information can be used improve forecasts rates, forecasted with corresponding erroreorrection model shown outperform an augmented VAR ignores cointegration rates. The results consistent belief arbitrage limits extent which different maturities given security diverge. addition, confirm appropriateness imposing common stochastic process for equilibrium models term structure.