Testing the predictive power of New Zealand bank bill futures rates
AbstractThe hypothesis that New Zealand 90-day bank bill futures rates are an unbiased predictor of 90-day bank bill rates is tested by applying the single-equation method of Stock and Watson (1993) to quarterly data from 1989 to 1997. The results do not reject the unbiasedness hypothesis for the one and two-quarter-ahead horizons tested. However, the estimated residuals are found to contain significant serial correlation in both cases, which suggests that some degree of information inefficiency might exist. The relative forecasting performance of futures rates against the random-walk is also investigated for weekly horizons up to 26 weeks. The results indicate that futures rates outperform the random-walk over all horizons tested, with the improvement statistically significant for all horizons greater than 1 week.
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Bibliographic InfoPaper provided by Reserve Bank of New Zealand in its series Reserve Bank of New Zealand Discussion Paper Series with number G98/8.
Date of creation: Jun 1998
Date of revision:
Find related papers by JEL classification:
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
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