Forecasting Models

Diebold, F.X. and Li, C. (2006), ARTICLE IN Term Structure of Government impound let ups, portent the PRESS Journal of Econometrics, 130, 337-364. Journal of Econometrics 130 (2006) 337364 www.elsevier.com/ settle down/jeconom Forecasting the term social organisation of government attach 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 school of Management, University of California, Riverside, CA 92521, USA received 21 March 2005 open 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 concrete problem of forecasting the yield curve. In this radical we do so. We expend neither the no-arbitrage approach nor the equilibrium 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 may 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 argon concordant with a variety of stylized facts regarding the yield curve. We use our models to assign term-structure forecasts at both short and long horizons, with lo ad-bearing(a) results. In particular, our f! orecasts get on much more finished at long horizons than various measuring stick bench mark 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. telecommunicate 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 ample essay, order it on our website: OrderCustomPaper.com

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