Explaining the Failure of the Expectations Hypothesis with Short-Term Rates
Series
School of Finance Working Paper Series
Type
working paper
Date Issued
2016-10-06
Author(s)
Abstract (De)
This paper provides the �rst systematic study of the temporal and cross-sectional Variation in the risk premium of the expectations hypothesis (EH) at very short end of the term structure. Using a unique and comprehensive dataset of European repurchase (repo) rates, we explain the sources and time variation a�ecting the risk premium. Our results show that the EH cannot be rejected when loans are secured by safe collateral and that unconventional monetary policy can substantially reduce risk premiums. By contrast, the EH is violated when interest rates are a�ected by funding risk and
collateral risk.
collateral risk.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
None
Publisher
SoF - HSG
Publisher place
St. Gallen
Volume
2016/19
Number
19
Pages
45
Subject(s)
Eprints ID
249436
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Name
16_19_Ranaldo et al_Explaing the Failure of the Expectations Hypothesis.pdf
Size
694.95 KB
Format
Adobe PDF
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