Cointegration and Tests of Present Value Models
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CitationCampbell, John Y., and Robert J. Shiller. 1987. Cointegration and tests of present value models. Journal of Political Economy 95(5): 1062-1088.
AbstractApplication of some advances in econometrics (in the theory of co-integrated vector autoregressive models) enables us to deal effectively with two problems in rational expectations present value models: nonstationarity of time series and incomplete data on information of market participants. With U.S. data, we find some relatively encouraging new results for the rational expectations theory of the term structure and some puzzling results for the present value model of stock prices.
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