Forecasting the Term Structure of Government Bond Yields Center for Financial Studies Forecasting the Term Structure of Government Bond Yields
Forecasting the Term Structure of Government Bond Yields Center for Financial Studies Forecasting the Term Structure of Government Bond Yields
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预测政府债券收益率的期限结构 金融研究中心 预测政府债券收益率的期限结构
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通讯作者:
Stan Zin
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作者:
F. Diebold;Canlin Li;Pieter Jan;Krahnen;Wieland;Dave Backus;Rob Bliss;Michael Brandt;Todd Clark;Qiang Dai;Ron Gallant;Mike Gibbons;David Marshall;Monika Piazzesi;Eric Renault;Glenn D. Rudebusch;Til Schuermann;Stan Zin
The Center for Financial Studies is a nonprofit research organization, supported by an association of more than 120 banks, insurance companies, industrial corporations and public institutions. Established in 1968 and closely affiliated with the University of Frankfurt, it provides a strong link between the financial community and academia. The CFS Working Paper Series presents the result of scientific research on selected topics in the field of money, banking and finance. The authors were either participants in the Center´s Research Fellow Program or members of one of the Center´s Research Projects. If you would like to know more about the Center for Financial Studies, please let us know of your interest. and may be freely reproduced for educational and research purposes, so long as it is not altered, this copyright notice is reproduced with it, and it is not sold for profit. Abstract: 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, with encouraging results. In particular, our forecasts appear much more accurate at long horizons than various standard benchmark forecasts. 1 The empirical literature that models yields as a cointegrated system, typically with one underlying stochastic trend (the short rate) and stationary spreads relative to the short rate, is similar in spirit.