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|Title:||The Fisher information measure and testing for market expectations|
|Citation:||Studies in Economics and Finance, 2003; 21(2):65-82|
|Ercan Tirtiroglu and Dogan Tirtiroglu|
|Abstract:||In an efficient market, where the participants form their expectations rationally, all potential changes induced by a predictable event are incorporated into the asset prices before the uncertainty relating to the outcome of the event is resolved. This paper develops a methodology to test whether temporal prices of fixed income assets reflect market efficiency. The methodology developed employs the Fisher information measure, which is couched within the framework of a moving variance process. We empirically demonstrate the methodology for U.S. Treasury's first exercise, in three decades, of its option to call (on October 09, 1991) one of its outstanding callable bonds. Empirical results indicate a delayed market reaction.|
|Appears in Collections:||Aurora harvest 5|
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