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Cointegration and Market Efficiency: An Application to the Canadian Treasury Bill Market

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Author Info
Park, S.B. () (Department of Economics, Carleton University)
Abstract

In this study we examine if the spot and forward interest rates of the Canadian Treasury bill market are cointegrated and test the bill market efficiency. The data used are monthly average yields of three- and six-month Treasury bills from July 1962 to February 1996. Both spot and forward rates are found to be I(0) and cointegrated in the Engle-Granger (1987) sense. Tests based on Hansen=s (1982) GMM method support the bill market efficiency hypothesis.

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File URL: http://www2.carleton.ca/economics/ccms/wp-content/ccms-files/cep97-06.pdf
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Publisher Info
Paper provided by Carleton University, Department of Economics in its series Carleton Economic Papers with number 97-06.

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Length: 14 pages
Date of creation: Oct 1997
Date of revision:
Handle: RePEc:car:carecp:97-06

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Related research
Keywords: Unit roots; Common trends; Forward premium; GMM estimation;

Find related papers by JEL classification:
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. repec:cup:etheor:v:7:y:1991:i:1:p:1-21 is not listed on IDEAS
  2. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July. [Downloadable!] (restricted)
  3. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March. [Downloadable!] (restricted)
  4. Sargent, Thomas J, 1972. "Rational Expectations and the Term Structure of Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 4(1), pages 74-97, Part I Fe. [Downloadable!] (restricted)
  5. Saikkonen, Pentti, 1991. "Asymptotically Efficient Estimation of Cointegration Regressions," Econometric Theory, Cambridge University Press, vol. 7(01), pages 1-21, March. [Downloadable!]
  6. Campbell, John Y & Shiller, Robert J, 1987. "Cointegration and Tests of Present Value Models," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1062-88, October. [Downloadable!] (restricted)
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  7. Park, Soo-Bin, 1982. "Spot and forward rates in the Canadian treasury bill market," Journal of Financial Economics, Elsevier, vol. 10(1), pages 107-114, March. [Downloadable!] (restricted)
  8. Fama, Eugene F, 1975. "Short-Term Interest Rates as Predictors of Inflation," American Economic Review, American Economic Association, vol. 65(3), pages 269-82, June. [Downloadable!] (restricted)
  9. Hall, Anthony D & Anderson, Heather M & Granger, Clive W J, 1992. "A Cointegration Analysis of Treasury Bill Yields," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 116-26, February. [Downloadable!] (restricted)
  10. Hamburger, Michael J & Platt, Elliott N, 1975. "The Expectations Hypothesis and the Efficiency of the Treasury Bill Market," The Review of Economics and Statistics, MIT Press, vol. 57(2), pages 190-99, May. [Downloadable!] (restricted)
  11. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [Downloadable!] (restricted)
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