Download or read book Forecasting Yield Curves with Survey Information written by Jack Clark Francis and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Campbell and Shiller [1991], Cochrane and Piazzesi [2005], Diebold and Li [2006] and many others have shown that today's yield curve possesses significant information about the dynamics of future yields. Vector autoregression (VAR) models can forecast interest rates with different maturities, but these forecasts can contain arbitrage opportunities. To avoid arbitrage it is important to use affine term structure models. This paper investigates the expectations of professional economic forecasters for the purpose of out-of-sample forecasting. The results suggest that survey data from professional economic forecasters can generate significant improvements in interest rate forecasts up to one year ahead.

Download or read book Yield Curve Modeling and Forecasting written by Francis X. Diebold and published by Princeton University Press. This book was released on 2013-01-15 with total page 223 pages. Available in PDF, EPUB and Kindle. Book excerpt: Understanding the dynamic evolution of the yield curve is critical to many financial tasks, including pricing financial assets and their derivatives, managing financial risk, allocating portfolios, structuring fiscal debt, conducting monetary policy, and valuing capital goods. Unfortunately, most yield curve models tend to be theoretically rigorous but empirically disappointing, or empirically successful but theoretically lacking. In this book, Francis Diebold and Glenn Rudebusch propose two extensions of the classic yield curve model of Nelson and Siegel that are both theoretically rigorous and empirically successful. The first extension is the dynamic Nelson-Siegel model (DNS), while the second takes this dynamic version and makes it arbitrage-free (AFNS). Diebold and Rudebusch show how these two models are just slightly different implementations of a single unified approach to dynamic yield curve modeling and forecasting. They emphasize both descriptive and efficient-markets aspects, they pay special attention to the links between the yield curve and macroeconomic fundamentals, and they show why DNS and AFNS are likely to remain of lasting appeal even as alternative arbitrage-free models are developed. Based on the Econometric and Tinbergen Institutes Lectures, Yield Curve Modeling and Forecasting contains essential tools with enhanced utility for academics, central banks, governments, and industry.

Download or read book Anchoring the Yield Curve Using Survey Expectations written by Carlo Altavilla and published by . This book was released on 2013 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: The dynamic behavior of the term structure of interest rates is difficult to replicate with models, and even models with a proven track record of empirical performance have underperformed since the early 2000s. On the other hand, survey expectations are accurate predictors of yields, but only for very short maturities. We argue that this is partly due to the ability of survey participants to incorporate information about the current state of the economy as well as forward-looking information such as that contained in monetary policy announcements. We show how the informational advantage of survey expectations about short yields can be exploited to improve the accuracy of yield curve forecasts given by a base model. We do so by employing a flexible projection method that anchors the model forecasts to the survey expectations in segments of the yield curve where the informational advantage exists and transmits the superior forecasting ability to all remaining yields. The method implicitly incorporates into yield curve forecasts any information that survey participants have access to, without the need to explicitly model it. We document that anchoring delivers large and significant gains in forecast accuracy for the whole yield curve, with improvements of up to 52% over the years 2000-2012 relative to the class of models that are widely adopted by financial and policy institutions for forecasting the term structure of interest rates.

Download or read book Anchoring the Yield Curve Using Survey Expectations written by and published by . This book was released on 2014 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: The dynamic behavior of the term structure of interest rates is difficult to replicate with models, and even models with a proven track record of empirical performance have underperformed since the early 2000s. On the other hand, survey expectations are accurate predictors of yields, but only for very short maturities. We argue that this is partly due to the ability of survey participants to incorporate information about the current state of the economy as well as forward-looking information such as that contained in monetary policy announcements. We show how the informational advantage of survey expectations about short yields can be exploited to improve the accuracy of yield curve forecasts given by a base model. We do so by employing a flexible projection method that anchors the model forecasts to the survey expectations in segments of the yield curve where the informational advantage exists and transmits the superior forecasting ability to all remaining yields. The method implicitly incorporates into yield curve forecasts any information that survey participants have access to, without the need to explicitly model it. We document that anchoring delivers large and significant gains in forecast accuracy for the whole yield curve, with improvements of up to 52% over the years 2000-2012 relative to the class of models that are widely adopted by financial and policy institutions for forecasting the term structure of interest rates.

Download or read book Forecasting the Yield Curve written by Christian Scheitlin and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The goal of this thesis is to forecast the US Treasury yield curve. In order to do so, the yield curve will first be modeled by the Nelson-Siegel (1987) method with the Diebold and Li (2006) extension and then forecasted. The data used is provided by Gürkaynak, Sack, and Wright (2006). The large dataset consists of fitted yields of US Treasury bonds. The conclusion of this thesis is that there is evidence that the Diebold and Li (2006) method can be applied to the dataset used. The forecasting results show mostly the correct change in direction of the yield curve but lack accuracy. The forecasting ability is quite well considering that the model does not include any macro-economic factors which are proven to influence the yield curve largely according to the results by Diebold, Piazzesi, and Rudebusch (2005).

Download or read book Forecasting the Yield Curve in a Data rich Environment Using the Factor augmented Nelson Siegel Model written by and published by . This book was released on 2010 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Term Structure Estimation with Survey Data on Interest Rate Forecasts written by Don H. Kim and published by . This book was released on 2005 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Yield Curve and Real Activity written by Zuliu Hu and published by International Monetary Fund. This book was released on 1993-03 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: The financial press frequently suggest that the shape of yield curve reflects information about the prospects of the economy. This paper attempts to formalize the link between the yield curve and the real economic activity. A closed-form formula for the term structure of interest rates is derived. It is shown that the term structure embodies the market’s expectation about changes in the macroeconomic fundamental--the growth in real aggregate output of the economy. The paper then documents the use of bond market data for predicting GDP growth in the G-7 industrial countries. The results suggest that a simple measure of the slope of the yield curve, namely the yield spread, serves as a good predictor of future economic growth. The out-of-sample forecasting performance of the yield spread compares favorably with that of the alternative stock price-based model and a univariate time series (ARMA) model. One practical implication is that it may be useful to add some measure of the term structure to the list of

Download or read book High Dimensional Yield Curves written by and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Forecasting the Term Structure of Government Bond Yields written by Francis X. Diebold and published by . This book was released on 2003 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: Despite powerful advances in yield curve modeling in the last twenty years, comparatively little attention has been paid to the key practical problem of forecasting the yield curve. In this paper we do so. We use neither the no-arbitrage approach, which focuses on accurately fitting the cross section of interest rates at any given time but neglects time-series dynamics, nor the equilibrium approach, which focuses on time-series dynamics (primarily those of the instantaneous rate) but pays comparatively little attention to fitting the entire cross section at any given time and has been shown to forecast poorly. Instead, we use variations on the Nelson-Siegel exponential components framework to model the entire yield curve, period-by-period, as a three dimensional parameter evolving dynamically. We show that the three time-varying parameters may be interpreted as factors corresponding to level, slope and curvature, and that they may be estimated with high efficiency. We propose and estimate autoregressive models for the factors, and we show that our models are consistent with a variety of stylized facts regarding the yield curve. We use our models to produce term-structure forecasts at both short and long horizons encouraging results. In particular, our forecasts appear much more accurate at long horizons than various standard benchmark forecasts.

Download or read book Yield Curve written by Frederic S. Mishkin and published by . This book was released on 1990 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides a brief survey of the relationship between the yield curve and future changes in interest rates and inflation. The expectations hypothesis of the term structure indicates .that when the yield curve is upward sloping, future short-term and long-term interest rates are expected to rise. Empirical evidence finds that as predicted by the expectations hypothesis, yield spreads are positively correlated with future changes in short-term interest rates, particularly at long horizons. However, yield spreads are negatively correlated with next period's change in long-term interest rates, the opposite prediction of the expectations hypothesis. Empirical evidence also suggests that the yield curve has almost no ability to forecast future inflation changes for short horizons: however, at horizons of a year or greater, the yield curve contains a great deal of information about the future path of inflation.

Download or read book Term Structure Forecasts of Inflation written by N. Blake and published by . This book was released on 2003 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: New evidence is presented on the information content of expected inflation derived from index-linked and conventional yield curves. Using monthly data the tests are done over three expectations horizons: 6, 12 and 24 months. In each case we find that there is little information content in this yield-curve-based expected inflation data. In the 12- and 24-month cases, the tests call on an alternative expected inflation series derived from consumer expectations surveys. We show that the use of the latter data renders the yield-curve-based data insignificant over these horizons.

Download or read book Forecasting the U S Term Structure of Interest Rates Using Nonparametric Functional Data Analysis written by João Caldeira and published by . This book was released on 2016 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we consider a novel procedure for forecasting the US yield curve by using the methodology of nonparametric kernel estimation of functional data (NP-FDA). Within this approach, each element of the sample is a monthly yield curve, evaluated at points corresponding to maturities. In this framework we attempt to capture the dynamics present in the sample of curves to forecast future values for the yield at a given maturity without imposing any parametric structure. In order to evaluated forecast performance of the proposed estimator, we consider four forecast horizons and the results are compared with widely known parametric models. Our estimates with NP-FDA present predictive performance superior to its competitors in many situations considered, especially at longer time horizons for long-term maturities. The methodol- ogy applied in this paper may be important for policy makers, fixed income portfolio managers, financial institutions and academics as it may prove useful in the construction of long-term scenarios for the yield curve.

Download or read book Forecasting Economic Activity Using the Yield Curve written by Todd Henry and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Inflation Expectations written by Peter J. N. Sinclair and published by Routledge. This book was released on 2009-12-16 with total page 402 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.

Download or read book The forecasting power of internal yield curve linkages written by Michele Modugno and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Forecasting Power of International Yield Curve Linkages written by Michele Modugno and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: