On a Numerical and Graphical Technique for Evaluating some Models Involving Rational Expectations

TY - UNPB

T1 - On a Numerical and Graphical Technique for Evaluating some Models Involving Rational Expectations

AU - Johansen, Søren

AU - Swensen, Anders Rygh

N1 - JEL classification: C32

PY - 2009

Y1 - 2009

N2 - Campbell and Shiller (1987) proposed a graphical technique for the present value model which consists of plotting the spread and theoretical spread as calculated from the cointegrated vector autoregressive model. We extend these techniques to a number of rational expectation models and give a general definition of spread and theoretical spread. The main results are the asymptotic distributions of the variance ratio, noise ratio, and correlation between the estimated spread and theoretical spreads. We derive sup tests for the recursively calculated quantities. Finally we apply the methods to two previous studies by Campbell and Shiller (1987) and Engsted (2002).

AB - Campbell and Shiller (1987) proposed a graphical technique for the present value model which consists of plotting the spread and theoretical spread as calculated from the cointegrated vector autoregressive model. We extend these techniques to a number of rational expectation models and give a general definition of spread and theoretical spread. The main results are the asymptotic distributions of the variance ratio, noise ratio, and correlation between the estimated spread and theoretical spreads. We derive sup tests for the recursively calculated quantities. Finally we apply the methods to two previous studies by Campbell and Shiller (1987) and Engsted (2002).

M3 - Working paper

BT - On a Numerical and Graphical Technique for Evaluating some Models Involving Rational Expectations

PB - Department of Economics, University of Copenhagen

ER -