Investigating Multiple Changes in Persistence in International Yields
AbstractAlthough better information about the dynamics of the yields on financial assets is decisive for both borrowers and lenders alike, it is not uncommon, in the literature, for researchers to employ standard unit-root tests to determine the extent of the persistence, and based on such results, treat the entire series as either stationary or non-stationary. In this paper, using weekly data of yields in four international markets – Canada, the UK, the US and the euro area – from March 1997 to October 2013, and employing an approach which allows us to identify regime switches between periods of I(0) versus I(1) behaviour, we provide empirical evidence for the realistic possibility that yields may, in fact, have changing persistence over time. Our results identify and compare, for each market and several maturities, the time variation properties in the dynamics of the yield curves. Some economic implications of our results are discussed.
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Bibliographic InfoPaper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2014_04.
Date of creation: Jul 2014
Date of revision: Jul 2014
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Trade; Multiple changes in persistence; yields; diversification;
Find related papers by JEL classification:
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- G00 - Financial Economics - - General - - - General
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-07-13 (All new papers)
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