6 All holding period yields are assumed to be reported on a common basis.
it] represent the nominal holding period yield on monetary asset i in period t, and let [R.
To convert an annualized 1-month holding period yield on a bank interest (360-day) basis to an annualized 1-month holding period yield on a bond interest (365-day) basis.
To convert an annual effective yield on a bond interest basis to an annualized 1-month holding period yield on a bond interest basis:
To convert an annual effective yield on a bank interest basis to an annualized 1-month holding period yield on a bond interest basis:
In essence, we estimate a multivariate ARCH-M model of excess holding period yields then use the estimated process to simulate time-varying term premia.
t] is a 3 by 1 vector of the ex-post excess holding period yields on Treasury bills that includes the two-month versus one-month bill, the three-month versus one-month bill, and the six-month versus three-month bill.
Statistical data for the in-sample residuals, the estimated term premia, and the ex-post holding period yields are depicted in Table 5.
In estimating term premia (for the case in which k = 2), first define the excess holding period yield, [y.
One possible explanation for this result is that the excess holding period yield on federal funds involves both a term premia derived from a consumption-based asset pricing model as well as default risk that may be uncorrelated with the term premia.