Peso problem explanations for term structure anomalies

Article Abstract:

Term structure anomalies in US data are considered in terms of a generalized peso problem, including estimation of a regime-switching model of short term interest rates.

Economic research, Observations

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On biases in tests of the expectations hypothesis of the term structure of interest rates

Article Abstract:

The asymptotic distributions of four standard regression-based tests used for the term structure of interest rates have been found to manifest extreme biases and dispersion. These biases are most prevalent in the slope coefficients of the conventional single-equation regression tests. Such biases can be attributed to the fact that extreme persistence tend to be focused in short interest rates. These conclusions imply that well-established Monte Carlo simulations are needed to evaluate the significance of bias-adjusted parameters in regression-based tests.

Financial Management NEC, Analysis, Usage, Evaluation, Interest rates, Financial management, Autoregression (Statistics), Distribution (Probability theory)

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The implications of first-order risk aversion for asset market premiums

Article Abstract:

A general equilibrium two-country monetary model was proposed to evaluate the excess return predictability evident in the bond, equity, and foreign exchange markets. Results from the application of the model to Japanese and US data reveal first-order risk aversion to significantly increase excess return predictability. The findings imply that time-varying risk premiums created by risk opposing agents within a markets economy do not sufficiently account for the resulting forms of excess return predictability.

Economics, Research and Development in the Social Sciences and Humanities, Research, Models, Risk (Economics), Foreign exchange, Equilibrium (Economics)

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