Title: Mean reversion in the US treasury constant maturity rates

Authors: Guglielmo Maria Caporale, Luis A. Gil-Alana

Addresses: Centre for Empirical Finance, Brunel University, Uxbridge, Middlesex UB8 3PH, UK. ' Universidad de Navarra, Facultad de Ciencias Economicas, Edificio Biblioteca, Entrada Este, E-31080 Pamplona, Spain

Abstract: The daily structure of the US treasury constant maturity rates is investigated in this paper by means of fractional integration techniques. Using a version of the tests of Robinson (1994) along with a model selection criterion based on diagnostic tests on the residuals, we show that the behaviour of this series can be captured by I(d) statistical models with the fractional parameter d close to but smaller than 1, which indicates mean reversion.

Keywords: fractional integration; long memory; mean reversion; US Treasury; constant maturity rates; USA; United States; model selection criterion; financial risk.

DOI: 10.1504/IJRAM.2009.022197

International Journal of Risk Assessment and Management, 2009 Vol.11 No.1/2, pp.59 - 66

Published online: 22 Dec 2008 *

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