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
- 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
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- Essahbi Essaadi & Mohamed Boutahar, 2010.
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