The author tests cointegration restrictions that are consistent with the expectations hypothesis of the term structure by employing the full-information maximum likelihood methods developed by S. Johansen. Yield curves appear to be the result of cointegration among interest rates. The cointegration vectors that best describe the long-term impact of interest-rate levels on interest-rate changes can often be written as linear combinations of interest-rate spreads. There is, however, difficulty in keeping short-term yields in such a restricted cointegrated system with other interest rates. Short-term speculative returns from long-term bonds do not conform to the expectations hypothesis.
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