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Alternative tests of rational expectations models : The case of the term structure

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  • Shiller, Robert J.

Abstract

A linearized version of the rational expectations models of the term structure is put forth in terms of a complete vector of equally spaced observations along the yield curve. A data series on intermediate maturity yields which meets the specifications of the model is presented. The model is tested against a specific and easily interpreted alternative. Earlier studies of rational expectations models, which used "volatility tests" or "likelihood ratio tests," are discussed.

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File URL: http://www.sciencedirect.com/science/article/B6VC0-45H2TBT-1F/2/b79f4efadee95fa96cb48bb8250d210f
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Bibliographic Info

Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 16 (1981)
Issue (Month): 1 (May)
Pages: 71-87

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Handle: RePEc:eee:econom:v:16:y:1981:i:1:p:71-87

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Web page: http://www.elsevier.com/locate/jeconom

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References

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  1. Sargent, Thomas J., 1979. "A note on maximum likelihood estimation of the rational expectations model of the term structure," Journal of Monetary Economics, Elsevier, vol. 5(1), pages 133-143, January.
  2. Robert J. Shiller, 1980. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," NBER Working Papers 0456, National Bureau of Economic Research, Inc.
  3. Richard, Scott F., 1978. "An arbitrage model of the term structure of interest rates," Journal of Financial Economics, Elsevier, vol. 6(1), pages 33-57, March.
  4. Bildersee, John S, 1975. "Some New Bond Indexes," The Journal of Business, University of Chicago Press, vol. 48(4), pages 506-25, October.
  5. Robert J. Shiller & J. Huston McCulloch, 1987. "The Term Structure of Interest Rates," NBER Working Papers 2341, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Robert J. Shiller & John Y. Campbell & Kermit L. Schoenholtz, 1983. "Forward Rates and Future Policy: Interpreting the Term Structure of Interest Rates," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 14(1), pages 173-224.
  2. John Y. Campbell & Robert J. Shiller, 1986. "Cointegration and Tests of Present Value Models," Cowles Foundation Discussion Papers 785, Cowles Foundation for Research in Economics, Yale University.
  3. Carriero, Andrea & Favero, Carlo A & Kaminska, Iryna, 2004. "Financial Factors, Macroeconomic Information and the Expectations Theory of the Term Structure of Interest Rates," CEPR Discussion Papers 4301, C.E.P.R. Discussion Papers.
  4. E. Scott Mayfield & Robert G. Murphy, 1993. "Explaining The Term Structure Of Interest Rates: A Panel Data Approach," Boston College Working Papers in Economics 230, Boston College Department of Economics.
  5. Alain Durré, 2006. "The Liquidity Premium in the Money Market: A Comparison of the German Mark Period and the Euro Area," German Economic Review, Verein für Socialpolitik, vol. 7, pages 163-187, 05.
  6. Gerlach, Stefan, 1995. "The Information Content of the Term Structure: Evidence for Germany," CEPR Discussion Papers 1264, C.E.P.R. Discussion Papers.
  7. Robert J. Shiller, 1985. "Conventional Valuation and the Term Structure of Interest Rates," NBER Working Papers 1610, National Bureau of Economic Research, Inc.
  8. Schotman, Peter C., 2001. "When units roots matter: excess volatility and excess smoothness of long-term interest rates," Journal of Empirical Finance, Elsevier, vol. 8(5), pages 669-694, December.
  9. Pilegaard, Rasmus & Durré, Alain & Evjen, Snorre, 2003. "Estimating risk premia in money market rates," Working Paper Series 0221, European Central Bank.
  10. Pornpinun Chantapacdepong, 2007. "Determinants of the time varying risk premia," Bristol Economics Discussion Papers 07/597, Department of Economics, University of Bristol, UK.
  11. Lars Peter Hansen & Thomas J. Sargent, 1981. "Exact linear rational expectations models: specification and estimation," Staff Report 71, Federal Reserve Bank of Minneapolis.
  12. Stefan Gerlach, 1996. "Monetary policy and the behaviour of interest rates: are long rates excessively volatile?," BIS Working Papers 34, Bank for International Settlements.
  13. David S. Jones & V. Vance Roley, 1984. "Rational Expectations, the Expectations Hypothesis, and Treasury Bill Yields: An Econometric Analysis," NBER Working Papers 0869, National Bureau of Economic Research, Inc.

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