Unlike equity returns, many fixed-income return measures appear to display long memory. We show that the extent of long memory in U.S. Treasury debt returns differs strongly for gross and excess holding period returns. Granger and others have argued that long memory may only reflect infrequent structural breaks. We explore the impact of structural instability on tests for long memory. We find only weak indications that structural instability lies behind the long memory in gross and excess returns. The evidence of long memory remains strong for yield and term premia series even after accounting for a series of potential underlying structural changes.
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