This paper considers a multivariate t version of the Gaussian dynamic conditional correlation (DCC) model proposed by Engle (2002), and suggests the use of devolatized returns computed as returns standardized by realized volatilities rather than by GARCH type volatility estimates. The t-DCC...

As Robert E. Hall (1988) notes, the magnitude of the intertemporal elasticity of substitution in consumption is "one of the central questions of macroeconomics." Do higher expected real interest rates lead to deferred consumption? The authors extend Hall's methodology and model, and compare...

This paper uses a dynamic accounting identity developed by Campbell to decompose movements in bond prices into elements due to changes in real interest rates, expected term premia and expected inflation. This decomposition is applied to UK short and long-maturity nominal bonds and index-linked...

We use a vector autoregression (VAR) to decompose unanticipated bond returns into news about fundamentals (expected real interest and inflation rates) and expected risk premiums. This decomposition is applied to U.K. short- and long-maturity nominal bonds, and to U.K. index-linked bonds. We also...

The exact finite sample behavior is investigated on the bias of multiperiod leastsquares forecasts in the normal autoregressive model <italic>y</italic><italic>null</italic> = α + β<italic>y</italic>_null + <italic>u</italic><italic>null</italic>. Necessary and sufficient conditions are given for the existence of the bias and an expression is presented which we use to obtain...

This paper considers a multivariate t version of the Gaussian dynamic conditional correlation (DCC) model proposed by Engle (2002), and suggests the use of devolatized returns computed as returns standardized by realized volatilities rather than by GARCH type volatility estimates. The t-DCC...

The paper presents a statistical analysis of sterling libor interest rates in two monetary regimes: free-floating of sterling prior to ERM-entry, and the recent ERM regime. It is found that short-term libor rates follow a random walk with time-varying volatility and with interest rate changes...