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Testing the expectations theory in a market of short-term financial assets

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  • Maria Asuncion Prats Albentosa
  • Arielle Beyaert

Abstract

The aim of this paper is to test the Rational Expectations Theory for the term structure of interest rates in a short-term asset market. Campbell and Shiller (1987) apply cointegration theory to present value models to test that theory for the case of very long run financial assets. In this paper, we reformulate their methodology in order to adapt it to the case of short-run assets. We then apply it to the Spanish interbank market over the period 1986-1992, obtaining some evidence in favour of the theory. The results ratify the institutional measures, that were taken in Spain in the second half of the 1980s, aimed at improving the channels of monetary transmission.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 8 (1998)
Issue (Month): 2 ()
Pages: 101-109

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Handle: RePEc:taf:apfiec:v:8:y:1998:i:2:p:101-109

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Cited by:
  1. Arielle Beyaert & Juan Jose Perez-Castejon, 2009. "Markov-switching models, rational expectations and the term structure of interest rates," Applied Economics, Taylor & Francis Journals, vol. 41(3), pages 399-412.
  2. Magdalena Massot Perelló & Juan M. Nave Pineda, 2003. "La hipótesis de las expectativas en el largo plazo: evidencia en el mercado español de deuda pública," Investigaciones Economicas, Fundación SEPI, vol. 27(3), pages 533-564, September.
  3. Arielle Beyaert & Juan rez-Castej, 2000. "Switching regime models in the Spanish inter-bank market," The European Journal of Finance, Taylor & Francis Journals, vol. 6(2), pages 93-112.

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