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BOOTSTRAPPING THE LONG RUN

Published online by Cambridge University Press:  02 March 2005

TIMOTHY G. CONLEY
Affiliation:
Northwestern University
LARS PETER HANSEN
Affiliation:
University of Chicago and National Bureau of Economic Research
WEN-FANG LIU
Affiliation:
University of Chicago

Extract

We develop and apply bootstrap methods for diffusion models when fitted to the long run as characterized by the stationary distribution of the data. To obtain bootstrap refinements to statistical inference, we simulate candidate diffusion processes. We use these bootstrap methods to assess measurements of local mean reversion or “pull” to the center of the distribution for short-term interest rates. We also use them to evaluate the fit of the model to the empirical density.

Type
Research Article
Copyright
© 1997 Cambridge University Press

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