Investors' Portfolio Behavior Under Alternative Models of Long-Term Interest Rate Expectations: Unitary, Rational, or Autoregressive
NBER Working Paper No. 178 (Also Reprint No. r0052)
This paper develops behavioral relationships explaining investors' demands for long-term bonds, using three alternative hypotheses about investors' expectations of future bond prices (yields). The results, based on U.S. 'data for six major categories of bond market investors, consistently support an autoregressive expectations model. The results also have implications for further aspects of investors' portfolio behavior, including expectations formation, response to inflation, and speed of adjustment.
Document Object Identifier (DOI): 10.3386/w0178
Published: Friedman, Benjamin M. and Roley, V. Vance. "Investors' Portfolio Behavior Under Alternative Models of Long-Term Interest Rate Expectations; Unitary, Rational, or Autoregressive." Econometrica, Vol. 47, No . 6, (November 1979), pp. 1475-1497.
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