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How well do experts predict interbank loan rates and spreads?

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  • Baghestani, Hamid
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    Abstract

    This study examines Blue Chip forecasts of the 3-month London interbank offered rate (LIBOR), federal funds rate (FFR), and LIBOR-FFR for 1988-2008. We show that the interest rate (spread) forecasts, while directionally accurate, imply asymmetric (symmetric) loss.

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    File URL: http://www.sciencedirect.com/science/article/B6V84-50J4M7X-1/2/3e064620fecb39c4ddb37d2f99ab5f67
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    Bibliographic Info

    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 109 (2010)
    Issue (Month): 1 (October)
    Pages: 4-6

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    Handle: RePEc:eee:ecolet:v:109:y:2010:i:1:p:4-6

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    Web page: http://www.elsevier.com/locate/ecolet

    Related research

    Keywords: Blue Chip survey LIBOR Federal funds Directional accuracy Asymmetric or symmetric loss;

    References

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    1. David H. Romer & Christina D. Romer, 2000. "Federal Reserve Information and the Behavior of Interest Rates," American Economic Review, American Economic Association, vol. 90(3), pages 429-457, June.
    2. Diebold, Francis X & Mariano, Roberto S, 1995. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 253-63, July.
    3. Batchelor, Roy & Dua, Pami, 1991. "Blue Chip Rationality Tests," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(4), pages 692-705, November.
    4. Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers 0055, National Bureau of Economic Research, Inc.
    5. Greer, Mark, 2003. "Directional accuracy tests of long-term interest rate forecasts," International Journal of Forecasting, Elsevier, vol. 19(2), pages 291-298.
    6. Francis X. Diebold & Jose A. Lopez, 1996. "Forecast Evaluation and Combination," NBER Technical Working Papers 0192, National Bureau of Economic Research, Inc.
    7. Harvey, David & Leybourne, Stephen & Newbold, Paul, 1997. "Testing the equality of prediction mean squared errors," International Journal of Forecasting, Elsevier, vol. 13(2), pages 281-291, June.
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