Empirical Analysis of the Yield Curve: The Information in the Data Viewed Through the Window of Cox, Ingersoll, and Ross

Posted: 29 Nov 2003

See all articles by Christopher G. Lamoureux

Christopher G. Lamoureux

University of Arizona

Hugh Douglas Witte

University of Missouri at Columbia - Department of Finance

Abstract

This paper uses recent advances in Bayesian estimation methods to exploit fully and efficiently the time-series and cross-sectional empirical restrictions of the Cox, Ingersoll, and Ross model of the term structure. We examine the extent to which the cross-sectional data (five different instruments) provide information about the model. We find that the time-series restrictions of the two-factor model are generally consistent with the data. However, the model's cross-sectional restrictions are not. We show that adding a third factor produces a significant statistical improvement, but causes the average time-series fit to the yields themselves to deteriorate.

Suggested Citation

Lamoureux, Christopher G. and Witte, Hugh Douglas, Empirical Analysis of the Yield Curve: The Information in the Data Viewed Through the Window of Cox, Ingersoll, and Ross. Available at SSRN: https://ssrn.com/abstract=313485

Christopher G. Lamoureux (Contact Author)

University of Arizona ( email )

Tucson, AZ 85721
United States
520-621-7488 (Phone)
520-621-1261 (Fax)

Hugh Douglas Witte

University of Missouri at Columbia - Department of Finance ( email )

403 Cornell Hall
Columbia, MO 65211
United States
573-882-2371 (Phone)

HOME PAGE: http://business.missouri.edu/People/FacStaff/finfac/index.htm#fin_witte

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