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Arbitrage and the Expectations Hypothesis

Francis Longstaff

Journal of Finance, 2000, vol. 55, issue 2, 989-994

Abstract: This paper shows that all traditional forms of the expectations hypothesis can be consistent with the absence of arbitrage if markets are incomplete. A key implication is that the validity of the expectations hypothesis is purely an empirical issue; the expectations hypothesis cannot be ruled out on a priori theoretical grounds.

Date: 2000
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https://doi.org/10.1111/0022-1082.00234

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