Are Capital Markets Efficient? Evidence from the Term Structure of Interest Rates in Europe
AbstractThis paper investigates the uncovered interest parity hypothesis in an unusual way. We provide empirical evidence on the efficiency of capital markets using a time domain approach. However, a common prediction from theoretical models is that inefficient capital markets cause greater volatility of the observed time series. By using cross spectral analysis we are able to test this proposition directly. We show, in particular, how this can be done for time-varying models and time-varying spectra. We use our techniques to examine the changing stability of the relationship between British and German interest rates during and following the ERM crisis of 1992/3.
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Bibliographic InfoArticle provided by Economic and Social Studies in its journal Economic and Social Review.
Volume (Year): 33 (2002)
Issue (Month): 3 ()
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Other versions of this item:
- Andrew Hughes Hallett & Christian R Richter, 2002. "Are Capital Markets Efficient? Evidence from the Term Structure of Interest Rates in Europe," Computing in Economics and Finance 2002 3, Society for Computational Economics.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
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- Christian Richter & Andrew Hughes Hallett, 2005. "A Time-Frequency Analysis of the Coherences of the US Business," Computing in Economics and Finance 2005 45, Society for Computational Economics.
- Essahbi Essaadi & Mohamed Boutahar, 2010.
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- Mario Cunha & Christian Richter, 2010. "Modelling the Cyclical Behaviour of Wine Production in the Douro Region Using a Time-Varying Parameters Approach," Working Papers 2010.1, International Network for Economic Research - INFER.
- TRIANDAFIL, Cristina Maria, 2013. "Sustainability of convergence in the context of macro-prudential policies in the European Union," Working Papers of National Institute of Economic Research 130618, National Institute of Economic Research.
- Andrew Hallett & Christian Richter, 2006. "Measuring the Degree of Convergence among European Business Cycles," Computational Economics, Society for Computational Economics, vol. 27(2), pages 229-259, May.
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