Interest Rate Innovations and the Volatility of Long-Term Bond Yields
Matthew J Cushing and
Lucy Ackert ()
Journal of Money, Credit and Banking, 1994, vol. 26, issue 2, 203-17
This paper develops and tests restrictions on the variance of innovations in long-term bond yields implied by the expectations model of the term structure. The authors adapt Kenneth D. West's (1988) stock-price volatility tests to the case of long but finite maturity bonds. Their approximate equality restriction does not require short-term rates to be stationary and, hence, provides a unified framework for volatility testing. When short rates are modeled as stationary, long-rate innovations appear excessively volatile. When short rates are modeled as difference stationary, long-rate innovations appear excessively smooth. Copyright 1994 by Ohio State University Press.
References: Add references at CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
http://links.jstor.org/sici?sici=0022-2879%2819940 ... 0.CO%3B2-W&origin=bc full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:26:y:1994:i:2:p:203-17
Access Statistics for this article
Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West
More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing ().