Long memory models of interest rates, the term structure, and variance bounds tests
AbstractVariance bounds tests of the rational expectations hypothesis of the interest rate term structure are sensitive to the stochastic characterization of short-term interest rates used. When a long memory or fractional difference nonstationary time series model is used in preference to a mean stationary model, the rational expectations hypothesis is not rejected. Long memory models of interest rates are estimated and tested against alternatives. Their forecasting properties are also examined. Hypothesis tests are based upon bootstrapping (Monte Carlo) methodologies.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 258.
Date of creation: 1985
Date of revision:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shea, Gary S., 1984. "Pitfalls in Smoothing Interest Rate Term Structure Data: Equilibrium Models and Spline Approximations," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 19(03), pages 253-269, September.
- Granger, C. W. J., 1981. "Some properties of time series data and their use in econometric model specification," Journal of Econometrics, Elsevier, vol. 16(1), pages 121-130, May.
- Singleton, Kenneth J, 1980. "Expectations Models of the Term Structure and Implied Variance Bounds," Journal of Political Economy, University of Chicago Press, vol. 88(6), pages 1159-76, December.
- Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
- Shiller, Robert J, 1979. "The Volatility of Long-Term Interest Rates and Expectations Models of the Term Structure," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1190-1219, December.
- Michener, Ronald W, 1982. "Variance Bounds in a Simple Model of Asset Pricing," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 166-75, February.
- Flavin, Marjorie A, 1983. "Excess Volatility in the Financial Markets: A Reassessment of the Empirical Evidence," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 929-56, December.
- Brick, John R & Thompson, Howard E, 1978. "Time Series Analysis of Interest Rates: Some Additional Evidence," Journal of Finance, American Finance Association, vol. 33(1), pages 93-103, March.
- Cargill, Thomas F, 1975. "The Term Structure of Interest Rates: A Test of the Expectations Hypothesis," Journal of Finance, American Finance Association, vol. 30(3), pages 761-71, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kris Vajs).
If references are entirely missing, you can add them using this form.