Previous research has investigated the multivariate normality of stock returns using tests based on the marginal distribution of returns. Due to the contemporaneous correlation across asset returns, these tests are difficult to interpret. The authors develop a general test procedure that takes...

This paper proposes and conducts direct tests of the mixture of distributions model for stock prices. By exploiting the model's bivariate conditional normality of price changes and trading volume, these restrictions can be tested under very weak assumptions regarding the daily flow of...

A general approach to testing serial dependence restrictions implied from financial models is developed. In particular, we discuss joint serial dependence restrictions imposed by random walk, market microstructure, and rational expectations models recently examined in the literature. This...

We provide a formal test of the liquidity preference hypothesis (LPH), that is, the monotonicity of ex ante term premiums, using nonparametric estimates that do not require a structural model for conditional expected returns. Although the point estimates of the term premiums are consistent with...

This paper reexamines evidence on the monotonicity of the term premium. Using a recently developed approach for testing inequality constraints, we propose and conduct tests for whether the term premium is monotonic and reach different conclusions from those implied by individual t-statistics on...

This paper investigates the implications of a 2-regime model of the business cycle for term premiums and volatilities in the bond market. The model, which is estimated via maximum likelihood using GDP, consumption and production data, has two key features -- mean growth rates that vary across...