IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Rational Expectations, the Expectations Hypothesis, and Treasury Bill Yields: An Econometric Analysis

  • David S. Jones
  • V. Vance Roley
Registered author(s):

    This paper tests the joint hypothesis of rational expectations and the expectations model of the term structure for three- and six-month Treasury bills. Previous studies are extended in three directions. First, common efficient markets-rational expectations tests are compared, and it is shown that four of the five tests considered are asymptotically equivalent, and that the fifth is less restrictive than the other four. Second, the joint hypothesis is tested using weekly data for Treasury bills maturing in exactly 13 and 26 weeks beginning in 1970 and ending in 1979. In contrast, previous studies using comparable data have typically discarded 12/13 of the sample to form a nonoverlapping data set. Finally, a more complete set of possible determinants of time-varying term premiums is tested.

    If 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.

    File URL: http://www.nber.org/papers/w0869.pdf
    Download Restriction: no

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0869.

    as
    in new window

    Length:
    Date of creation: Mar 1982
    Date of revision:
    Publication status: published as Jones, David S. and V. Vance Roley. "Rational Expectations and the Expectations Model of the Term Structure: A Test Using Weekly Data." Journal of Monetary Economics, Vol. 12, No. 3 (Spetember 1983), pp. 453- 465. B.V. (North-Holland Publishing).
    Handle: RePEc:nbr:nberwo:0869
    Note: ME
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Web page: http://www.nber.org
    Email:


    More information through EDIRC

    References listed on IDEAS
    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.:

    as in new window
    1. Barro, Robert J., 1978. "Unanticipated Money, Output, and the Price Level in the United States," Scholarly Articles 3450988, Harvard University Department of Economics.
    2. Robert J. Shiller, 1980. "The Use of Volatility Measures in Assessing Market Efficiency," NBER Working Papers 0565, National Bureau of Economic Research, Inc.
    3. 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.
    4. Modigliani, Franco & Shiller, Robert J, 1973. "Inflation, Rational Expectations and the Term Structure of Interest Rates," Economica, London School of Economics and Political Science, vol. 40(157), pages 12-43, February.
    5. Friedman, Benjamin M., 1980. "Survey evidence on the `rationality' of interest rate expectations," Journal of Monetary Economics, Elsevier, vol. 6(4), pages 453-465, October.
    6. Frederic S. Mishkin, 1980. "Monetary Policy and Long-Term Interest Rates: An Efficient Markets Approach," NBER Working Papers 0517, National Bureau of Economic Research, Inc.
    7. Shiller, Robert J., 1981. "Alternative tests of rational expectations models : The case of the term structure," Journal of Econometrics, Elsevier, vol. 16(1), pages 71-87, May.
    8. Fama, Eugene F., 1976. "Forward rates as predictors of future spot rates," Journal of Financial Economics, Elsevier, vol. 3(4), pages 361-377, October.
    9. Hansen, Lars Peter & Hodrick, Robert J, 1980. "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 829-53, October.
    10. Hakkio, Craig S., 1981. "The term structure of the forward premium," Journal of Monetary Economics, Elsevier, vol. 8(1), pages 41-58.
    11. Barro, Robert J, 1977. "Unanticipated Money Growth and Unemployment in the United States," American Economic Review, American Economic Association, vol. 67(2), pages 101-15, March.
    12. Frederic S. Mishkin, 1978. "Efficient-Markets Theory: Implications for Monetary Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 9(3), pages 707-752.
    13. Adrian W. Throop, 1981. "Interest rate forecasts and market efficiency," Economic Review, Federal Reserve Bank of San Francisco, issue Spr, pages 29-43.
    14. Abel, Andrew B & Mishkin, Frederic S, 1983. "On the Econometric Testing of Rationality-Market Efficiency," The Review of Economics and Statistics, MIT Press, vol. 65(2), pages 318-23, May.
    15. 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.
    16. Benjamin M. Friedman, 1980. "Survey Evidence on The Rationality of Interest Rate Expectations," NBER Working Papers 0261, National Bureau of Economic Research, Inc.
    17. Sargent, Thomas J., 1979. "A note on maximum likelihood estimation of the rational expectations model of the term structure," Journal of Monetary Economics, Elsevier, vol. 5(1), pages 133-143, January.
    18. Mishkin, Frederic S, 1982. " Monetary Policy and Short-Term Interest Rates: An Efficient Markets-Rational Expectations Approach," Journal of Finance, American Finance Association, vol. 37(1), pages 63-72, March.
    19. Hamburger, Michael J & Platt, Elliott N, 1975. "The Expectations Hypothesis and the Efficiency of the Treasury Bill Market," The Review of Economics and Statistics, MIT Press, vol. 57(2), pages 190-99, May.
    20. Pesando, James E, 1975. "A Note on the Rationality of the Livingston Price Expectations," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 849-58, August.
    21. Pesando, James E, 1975. "Determinants of Term Premiums in the Market for United States Treasury Bills," Journal of Finance, American Finance Association, vol. 30(5), pages 1317-27, December.
    22. Singleton, Kenneth J, 1980. "Maturity-Specific Disturbances and the Term Structure of Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(4), pages 603-14, November.
    23. Friedman, Benjamin M, 1979. "Interest Rate Expectations versus Forward Rates: Evidence from an Expectations Survey," Journal of Finance, American Finance Association, vol. 34(4), pages 965-73, September.
    24. Roley, V Vance, 1981. "The Determinants of the Treasury Security Yield Curve," Journal of Finance, American Finance Association, vol. 36(5), pages 1103-26, December.
    25. Franco Modigliani & Richard Sutch, 1967. "Debt Management and the Term Structure of Interest Rates: An Empirical Analysis of Recent Experience," Journal of Political Economy, University of Chicago Press, vol. 75, pages 569.
    26. Pesando, James E, 1978. "On the Efficiency of the Bond Market: Some Canadian Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1057-76, December.
    27. McCulloch, J Huston, 1975. "An Estimate of the Liquidity Premium," Journal of Political Economy, University of Chicago Press, vol. 83(1), pages 95-119, February.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:0869. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.