A RECONCILIATION OF SOME PARADOXICAL EMPIRICAL RESULTS ON THE EXPECTATIONS MODEL OF THE TERM STRUCTURE

Authors
DRIFFILL J PSARADAKIS Z SOLA M
Citation
J. Driffill et al., A RECONCILIATION OF SOME PARADOXICAL EMPIRICAL RESULTS ON THE EXPECTATIONS MODEL OF THE TERM STRUCTURE, Oxford bulletin of economics and statistics, 59(1), 1997, pp. 29
Citations number
29
Categorie Soggetti
Social Sciences, Mathematical Methods",Economics,"Mathematical, Methods, Social Sciences","Statistic & Probability","Statistic & Probability
Journal title
Oxford bulletin of economics and statistics → ACNP
ISSN journal
03059049
Volume
59
Issue
1
Year of publication
1997
Database
ISI
SICI code
0305-9049(1997)59:1<29:AROSPE>2.0.ZU;2-N
Abstract
In this paper we attempt to reconcile contradictory empirical results for the expectations model of the term structure which are found when it is tested by a variety of methods based on single-equation and VAR models, Using monthly data for one-month and three-month interest rate s, we show that the expectations hypothesis is rejected for the US and UK term structures on the basis of some popular tests. However, tests based on VAR models or on IV regressions of yield spreads on future s hort rate changes provide no evidence against the expectations model w ith a random component in the term premium.