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Combining Canadian Interest Rate Forecasts

In: Interest Rate Models, Asset Allocation and Quantitative Techniques for Central Banks and Sovereign Wealth Funds

Author

Listed:
  • David Jamieson Bolder
  • Yuliya Romanyuk

Abstract

Model risk is a real concern for financial economists using interest-rate forecasts for the purposes of monetary policy analysis, strategic portfolio allocations, or risk-management decisions. The issue is that one’s analysis is always conditional upon the model selected to describe the uncertainty in the future evolution of financial variables. Moreover, using an alternative model can, and does, lead to different results and possibly different decisions. Selecting a single model is challenging because different models generally perform in varying ways on alternative dimensions, and it is rare that a single model dominates along all possible dimensions.

Suggested Citation

  • David Jamieson Bolder & Yuliya Romanyuk, 2010. "Combining Canadian Interest Rate Forecasts," Palgrave Macmillan Books, in: Arjan B. Berkelaar & Joachim Coche & Ken Nyholm (ed.), Interest Rate Models, Asset Allocation and Quantitative Techniques for Central Banks and Sovereign Wealth Funds, chapter 1, pages 3-30, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-25129-8_1
    DOI: 10.1057/9780230251298_1
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    More about this item

    Keywords

    Random Walk; Forecast Error; Bond Price; Bayesian Model Average; Individual Forecast;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications

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