02093cam a22002537 4500001000600000003000500006005001700011008004100028100002000069245017300089260006600262490005100328500001800379520102600397530006101423538007201484538003601556700002301592700002301615710004201638830008601680856003701766856003601803t0191NBER20191017122559.0191017s1996 mau||||fs|||| 000 0 eng d1 aBekaert, Geert.10aOn Biases in Tests of the Expecations Hypothesis of the Term Structure Of Interest Ratesh[electronic resource] /cGeert Bekaert, Robert J. Hodrick, David A. Marshall. aCambridge, Mass.bNational Bureau of Economic Researchc1996.1 aNBER technical working paper seriesvno. t0191 aJanuary 1996.3 aWe document extreme bias and dispersion in the small sample distributions of five standard regression tests of the expectations hypothesis of the term structure of interest rates. These biases derive from the extreme persistence in short interest rates. We derive approximate analytic expressions for these biases, and we characterize the small-sample distributions of these test statistics under a simple first-order autoregressive data generating process for the short rate. The biases are also present when the short rate is modeled with a more realistic regime-switching process. The differences between the small-sample distributions of test statistics and the asymptotic distributions partially reconcile the different inferences drawn when alternative tests are used to evaluate the expectations hypothesis. In general, the test statistics reject the expectations hypothesis more strongly and uniformly when they are evaluated using the small-sample distributions, as compared to the asymptotic distributions. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web.1 aHodrick, Robert J.1 aMarshall, David A.2 aNational Bureau of Economic Research. 0aTechnical Working Paper Series (National Bureau of Economic Research)vno. t0191.4 uhttp://www.nber.org/papers/t019141uhttp://dx.doi.org/10.3386/t0191