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On a numerical and graphical technique for evaluating some models involving rational expectations

  • Søren Johansen

    ()

    (University of Copenhagen and CREATES)

  • Anders Rygh Swensen

    ()

    (University of Oslo and Statistics Norway)

Campbell and Shiller (1987) proposed a graphical technique for the present value model which consists of plotting the spread and theoretical spread as calculated from the cointegrated vector autoregressive model. We extend these techniques to a number of rational expectation models and give a general de¯nition of spread and theoretical spread. The main results are the asymptotic distributions of the variance ratio, noise ratio, and correlation between the estimated spread and theoretical spreads. We derive sup tests for the recursively calculated quantities. Finally we apply the methods to two previous studies by Campbell and Shiller (1987) and Engsted (2002).

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Paper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2009-19.

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Length: 32
Date of creation: 12 May 2009
Date of revision:
Handle: RePEc:aah:create:2009-19
Contact details of provider: Web page: http://www.econ.au.dk/afn/

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  1. Carriero, Andrea & Favero, Carlo A. & Kaminska, Iryna, 2006. "Financial factors, macroeconomic information and the Expectations Theory of the term structure of interest rates," Journal of Econometrics, Elsevier, vol. 131(1-2), pages 339-358.
  2. Johansen, Soren & Swensen, Anders Rygh, 1999. "Testing exact rational expectations in cointegrated vector autoregressive models," Journal of Econometrics, Elsevier, vol. 93(1), pages 73-91, November.
  3. John Y. Campbell, Robert J. Shiller, 1988. "The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors," Review of Financial Studies, Society for Financial Studies, vol. 1(3), pages 195-228.
  4. John Y. Campbell & Robert J. Shiller, 1986. "Cointegration and Tests of Present Value Models," NBER Working Papers 1885, National Bureau of Economic Research, Inc.
  5. Engsted, Tom, 2002. " Measures of Fit for Rational Expectations Models," Journal of Economic Surveys, Wiley Blackwell, vol. 16(3), pages 301-55, July.
  6. Kurmann, Andre, 2005. "Quantifying the uncertainty about the fit of a new Keynesian pricing model," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1119-1134, September.
  7. Johansen, Soren, 1995. "Identifying restrictions of linear equations with applications to simultaneous equations and cointegration," Journal of Econometrics, Elsevier, vol. 69(1), pages 111-132, September.
  8. repec:hal:journl:hal-00287137 is not listed on IDEAS
  9. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, March.
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