This paper discusses a number of likelihood ratio tests on long-run relations and common trends in the I(2) model and provide new results on the test of overidentifying restrictions on beta xt and the asymptotic variance for the stochastic trends parameters, alpha 1: How to specify deterministic...

Shiller (1981) and others have shown that the quantitative predictions of the REH present-value model are inconsistent with time-series data on stock prices and dividends. In this paper, we assess the empirical relevance of the model without explicitly representing how a rational market...

Deviations of market participants forecasts from full-information rational expectations (FIRE) are usually specified to arise from limited information or irrationality. Relying on a novel theoretical characterization, we present empirical evidence that these specifications are inconsistent with...