Estimation of continuous-time models for stock returns and interest rates

dc.contributor.author

Gallant, AR

dc.contributor.author

Tauchen, G

dc.date.accessioned

2010-06-28T18:59:01Z

dc.date.issued

1997-12-01

dc.description.abstract

Efficient Method of Moments is used to estimate and test continuous-time diffusion models for stock returns and interest rates. For stock returns, a four-state, two-factor diffusion with one state observed can account for the dynamics of the daily return on the S&P Composite Index, 1927-1987. This contrasts with results indicating that discrete-time, stochastic volatility models cannot explain these dynamics. For interest rates, a trivariate Yield-Factor Model is estimated from weekly, 1962-1995, Treasury rates. The Yield-Factor Model is sharply rejected, although extensions permitting convexities in the local variance come closer to fitting the data.

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application/pdf

dc.identifier.issn

1365-1005

dc.identifier.uri

https://hdl.handle.net/10161/2590

dc.language.iso

en_US

dc.relation.ispartof

Macroeconomic Dynamics

dc.title

Estimation of continuous-time models for stock returns and interest rates

dc.type

Journal article

pubs.begin-page

135

pubs.end-page

168

pubs.issue

1

pubs.organisational-group

Duke

pubs.organisational-group

Economics

pubs.organisational-group

Faculty

pubs.organisational-group

Trinity College of Arts & Sciences

pubs.publication-status

Published

pubs.volume

1

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