Daily data on short-term interest rates are used to show how changes in Federal Reserve operating procedures have affected the term structure. Yield spreads were helpful in predicting short-term interest rate movements during the nonborrowed reserves targeting period (1979-82), but not during...

This paper develops a dynamic asset pricing model with persistent heterogeneous beliefs. The model features competitive traders who receive idiosyncratic signals about an underlying fundamentals process. We adapt Futia's (1981) frequency domain methods to derive conditions on the fundamentals...

We conduct Monte Carlo experiments to examine whether the Hansen and Jagannathan (1991) bound is a useful device for evaluating asset pricing models. Specifically, we use recently developed statistical tests, which are based on a 'distance' between the model and the Hansen-Jagannathan bound, to...