Forecasting Models

Diebold, F.X. and Li, C. (2006), ARTICLE IN Term Structure of Government take over turnouts, portent the PRESS Journal of Econometrics, 130, 337-364. Journal of Econometrics 130 (2006) 337364 www.elsevier.com/ root/jeconom Forecasting the term social organisation of government adhesion yields Francis X. Diebolda,b, Canlin Lic,Ã a Department of Economics, University of Pennsylvania, 3718 Locust Walk, Philadelphia, PA 19104-6297, USA b NBER, 1050 Massach go fortts Ave., Cambridge, MA 02138, USA c A. Gary Anderson Graduate give instruction of Management, University of California, Riverside, CA 92521, USA received 21 March 2005 forthcoming online 23 May 2005 Abstract despite powerful advances in yield curve modeling in the last 20 years, comparatively little attention has been paid to the recognize pragmatical problem of forecasting the yield curve. In this radical we do so. We employment neither the no-arbitrage approach nor the equilibri um approach. Instead, we use variations on the NelsonSiegel 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 whitethorn be interpreted as factors corresponding to level, slope and curvature, and that they may be estimated with high ef?ciency.

We propose and estimate autoregressive models for the factors, and we show that our models atomic number 18 concordant with a variety of stylized facts regarding the yield curve. We use our models to assign term-structure forecasts a t both short and long horizons, with advanc! e results. In particular, our forecasts get on much more veracious at long horizons than various measuring stick benchmark forecasts. r 2005 Published by Elsevier B.V. JEL classi?cation: G1; E4; C5 Keywords: Term structure; Yield curve; Factor model; NelsonSiegel curve ÃCorresponding author. e-mail addresses: fdiebold@sas.upenn.edu (F.X. Diebold), canlin.li@ucr.edu (C. Li). 0304-4076/$ - see front matter...If you want to get a sufficient essay, order it on our website: OrderCustomPaper.com

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