This paper investigates whether excess stock price volatility may be due in part to a failure of the market to form rational expectations. Using data on analysts' expectations of long run earnings growth for individual companies, the authors report a number of interrelated results which lend...

One implication of the expectations hypothesis is that the yield spread should forecast subsequent changes in the long yield. However, regression tests based on this specification strongly reject the expectations hypothesis. One explanation for this rejection is that these tests fail to allow...