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Cointegration and Tests of Present Value Models

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  • Campbell, John
  • Shiller, Robert

Abstract

Application of some advances in econometrics (in the theory of co-integrated vector autoregressive models) enables us to deal effectively with two problems in rational expectations present value models: nonstationarity of time series and incomplete data on information of market participants. With U.S. data, we find some relatively encouraging new results for the rational expectations theory of the term structure and some puzzling results for the present value model of stock prices.

Suggested Citation

  • Campbell, John & Shiller, Robert, 1987. "Cointegration and Tests of Present Value Models," Scholarly Articles 3122490, Harvard University Department of Economics.
    • Handle: RePEc:hrv:faseco:3122490
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    1. Campbell, John Y, 1987. "Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis," Econometrica, Econometric Society, vol. 55(6), pages 1249-1273, November.
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