NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Testable Implications of Affine Term Structure Models

James D. Hamilton, Jing Cynthia Wu

NBER Working Paper No. 16931
Issued in April 2011
NBER Program(s):   AP   ME

Affine term structure models have been used to address a wide range of questions in macroeconomics and finance. This paper investigates a number of their testable implications which have not previously been explored. We show that the assumption that certain specified yields are priced without error is testable, and find that the implied measurement or specification error exhibits serial correlation in all of the possible formulations investigated here. We further find that the predictions of these models for the average levels of different interest rates are inconsistent with the observed data, and propose a more general specification that is not rejected by the data.

download in pdf format
   (375 K)

email paper

This paper is available as PDF (375 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w16931

Published: Hamilton, James D. & Wu, Jing Cynthia, 2014. "Testable implications of affine term structure models," Journal of Econometrics, Elsevier, vol. 178(P2), pages 231-242. citation courtesy of

Users who downloaded this paper also downloaded these:
Hamilton and Wu w17772 Identification and Estimation of Gaussian Affine Term Structure Models
Hamilton and Wu w16956 The Effectiveness of Alternative Monetary Policy Tools in a Zero Lower Bound Environment
van Binsbergen, Fernández-Villaverde, Koijen, and Rubio-Ramírez w15890 The Term Structure of Interest Rates in a DSGE Model with Recursive Preferences
Vayanos and Vila w15487 A Preferred-Habitat Model of the Term Structure of Interest Rates
Erel, Julio, Kim, and Weisbach w16941 Macroeconomic Conditions and Capital Raising
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us