Explaining the Failure of the Expectations Hypothesis with Short-Term Rates

Item Type Monograph (Working Paper)

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.

Authors Ranaldo, Angelo & Rupprecht, Matthias
Language English
Subjects finance
Institute/School s/bf - Swiss Institute of Banking and Finance
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HSG Classification contribution to scientific community
HSG Profile Area None
Date 6 October 2016
Publisher SoF - HSG
Place of Publication St. Gallen
Series Name School of Finance Working Paper Series
Volume 2016/19
Number 19
Number of Pages 45
Depositing User Geraldine Frei-Böbel
Date Deposited 13 Oct 2016 10:02
Last Modified 20 Feb 2018 01:21
URI: https://www.alexandria.unisg.ch/publications/249436


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Ranaldo, Angelo & Rupprecht, Matthias: Explaining the Failure of the Expectations Hypothesis with Short-Term Rates. School of Finance Working Paper Series, 2016, 19.


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