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Testing the predictive power of the term structure without data snooping bias

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  • Kao, Yi-Cheng
  • Kuan, Chung-Ming
  • Chen, Shikuan

Abstract

It is well documented that the term structure of interest rates has predictive power for real economic growth. Applying the stepwise superior predictive ability test, we find that superior models contain both a short-term rate and a term spread.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 121 (2013)
Issue (Month): 3 ()
Pages: 546-549

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Handle: RePEc:eee:ecolet:v:121:y:2013:i:3:p:546-549

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

Related research

Keywords: Data snooping; GDP growth; Stepwise SPA test; Term spread;

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  1. Andrew Ang & Monika Piazzesi & Min Wei, 2003. "What does the yield curve tell us about GDP growth?," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  2. James H. Stock & Mark W.Watson, 2003. "Forecasting Output and Inflation: The Role of Asset Prices," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 788-829, September.
  3. Arturo Estrella & Gikas A. Hardouvelis, 1989. "The term structure as a predictor of real economic activity," Research Paper 8907, Federal Reserve Bank of New York.
  4. Rendu de Lint, Christel & Stolin, David, 2003. "The predictive power of the yield curve: a theoretical assessment," Journal of Monetary Economics, Elsevier, vol. 50(7), pages 1603-1622, October.
  5. Michael D. Bordo & Joseph G. Haubrich, 2008. "The Yield Curve as a Predictor of Growth: Long-Run Evidence, 1875-1997," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 182-185, February.
  6. Hansen, Peter Reinhard, 2005. "A Test for Superior Predictive Ability," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 365-380, October.
  7. Michael D. Bordo & Joseph G. Haubrich, 2006. "Forecasting with the yield curve; level, slope, and output 1875-1997," Working Paper 0611, Federal Reserve Bank of Cleveland.
  8. Harvey, Campbell R., 1988. "The real term structure and consumption growth," Journal of Financial Economics, Elsevier, vol. 22(2), pages 305-333, December.
  9. Hsu, Po-Hsuan & Hsu, Yu-Chin & Kuan, Chung-Ming, 2010. "Testing the predictive ability of technical analysis using a new stepwise test without data snooping bias," Journal of Empirical Finance, Elsevier, vol. 17(3), pages 471-484, June.
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