Investors' Portfolio Behavior Under Alternative Models of Long-Term Interest Rate Expectations: Unitary, Rational, or Autoregressive
This paper develops behavioral relationships explaining investors' demands for long-term bonds, using three alternative hypotheses about investors' expectations of future bond prices (yields). The results, based on U.S. 'data for six major categories of bond market investors, consistently support an autoregressive expectations model. The results also have implications for further aspects of investors' portfolio behavior, including expectations formation, response to inflation, and speed of adjustment.
|Date of creation:||Apr 1980|
|Date of revision:|
|Publication status:||published as Friedman, Benjamin M. and Roley, V. Vance. "Investors' Portfolio Behavior Under Alternative Models of Long-Term Interest Rate Expectations; Unitary, Rational, or Autoregressive." Econometrica, Vol. 47, No . 6, (November 1979), pp. 1475-1497.|
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- James M. Brundy & Dale W. Jorgenson, 1971. "Efficient estimation of simultaneous equations by instrumental variables," Working Papers in Applied Economic Theory 3, Federal Reserve Bank of San Francisco.
- Brundy, James M & Jorgenson, Dale W, 1971. "Efficient Estimation of Simultaneous Equations by Instrumental Variables," The Review of Economics and Statistics, MIT Press, vol. 53(3), pages 207-24, August.
- William C. Brainard & James Tobin, 1968. "Pitfalls in Financial Model-Building," Cowles Foundation Discussion Papers 244, Cowles Foundation for Research in Economics, Yale University.
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