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| Author: | Dell'Aquila, R. Ronchetti, E. Trojani, F. |
| Title: | Robust GMM analysis of models for the short rate process |
| Journal: | Journal of Empirical Finance
2003 : MAY, VOL. 10:3, p. 373-397 |
| Index terms: | TESTS FACTOR ANALYSIS MODELS INTEREST RATES ESTIMATION |
| Language: | eng |
| Abstract: | The authors re-examine the empirical evidence concerning a well-known class of one-factor models for the short rate process and some recent extensions allowing for a nonlinear drift and for changing parameters with a new statistical methodology based on robust statistics, the Robust Generalized Method of Moments (RGMM). The authors find that standard GMM model selection procedures are highly unstable in these applications. When testing the CKLS models with the RGMM the authors find that they are all clearly misspecified and the authors identify a clustering of influential observations in the 1979-1982 subperiod, a time span that is well known to coincide with a temporary change in the monetary policy of the Federal Reserve. |
SCIMA