## Specification Analysis of Affine Term Structure Models (1997)

Citations: | 333 - 30 self |

### BibTeX

@MISC{Dai97specificationanalysis,

author = {Qiang Dai and Kenneth J. Singleton},

title = {Specification Analysis of Affine Term Structure Models},

year = {1997}

}

### Years of Citing Articles

### OpenURL

### Abstract

In this paper, we characterize, interpret, and test the over-identifying restrictions imposed in affine models of the term-structure. "We begin by showing, using the classification scheme proposed by Dai, Liu, and Singleton [10] for general affine diffusions, that the family of N-factor models can be classified into N + 1 non-nested sub-families of models. For each subfamily, we derive a canonical model with the property that every admissible member of this family is equivalent to or a nested special case of our canonical model. Second, using our classification scheme and canonical models, we show that many of the three-factor models in the literature impose potentially strong over-identifying restrictions, and we completely characterize these restrictions. Finally, we compute simulated-method-of-moments estimates for several members of the sub-family of three-factor models that nest the "benchmark" model of Chen [8], and test the over-identifying restrictions on the joint distribution...