Predictability Tests for the Expectations Hypothesis in the Presence of MA Disturbances

44 Pages Posted: 7 Nov 2009 Last revised: 16 Mar 2011

See all articles by Seongman Moon

Seongman Moon

Universidad Carlos III de Madrid - Department of Economics

Carlos Velasco

Universidad Carlos III de Madrid - Department of Economics

Date Written: September 30, 2009

Abstract

This paper develops new inference methods for testing the expectations hypothesis in a general econometric framework. In particular, we consider nonparametric tests of the predictability of excess returns in the presence of MA disturbances. We discuss several alternatives of aggregation and investigate their asymptotic and finite sample properties. We illustrate that the serial dependence tests can also provide valid information for identifying particular economic alternatives when testing the expectations hypothesis in foreign exchange markets.

Keywords: Expectations hypothesis, excess returns, MA disturbances, variance ratio test, Box-Pierce test, Fama-French test, pooled method, minimum/maximum method

JEL Classification: C14, F31, F37

Suggested Citation

Moon, Seongman and Velasco, Carlos, Predictability Tests for the Expectations Hypothesis in the Presence of MA Disturbances (September 30, 2009). Available at SSRN: https://ssrn.com/abstract=1500272 or http://dx.doi.org/10.2139/ssrn.1500272

Seongman Moon

Universidad Carlos III de Madrid - Department of Economics ( email )

Calle Madrid 126
Getafe, 28903
Spain

Carlos Velasco (Contact Author)

Universidad Carlos III de Madrid - Department of Economics ( email )

Calle Madrid 126
Getafe, 28903
Spain
+34-91 6249646 (Phone)
+34-91 6249875 (Fax)

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