Riding the Yield Curve: Reprise
31 Pages Posted: 28 Jun 2004 Last revised: 7 Aug 2022
Date Written: November 1990
Abstract
We investigate the efficacy of riding the yield curve. This strategy dictates holding longer-term treasury bills when the yield curve is upwardsloping. We find that the strategy is surprisingly effective. it stochastically dominates buying and holding shorter-term bills for large subperiods, and nearly dominates for the entire sample period, 1949-1988. Our empirical results suggest that abnormal profit opportunities are available from selectively increasing the maturity of a short-term portfolio.
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