This paper shows that the recent literature that tests for a long-run Fisher relationship using cointegration analysis is seriously flawed. Cointegration analysis assumes that the variables in question are I(1) or I(d) with the same d. Using monthly post-war U.S. data from 1959-1997, we show...

This paper compares six term structure estimation methods empirically in terms of zero and forward rate curves as well as ex ante price and yield prediction accuracy. Specifically, we use daily government bond quotations to generate true out-of-sample prediction errors based on the model's...

To what degree are term structure models fitted to time series data likely to be stable? Where are the sources of instability? How well might highly parameterized models, such as GARCH models, be able to capture this behavior? These are questions that have occupied many researchers which we...