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Forecasting US bond yields at weekly frequency

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Author Info

  • Riccardo LUCCHETTI

    ()
    (Universita' Politecnica delle Marche, Dipartimento di Economia)

  • Giulio PALOMBA

    ([n.a.])

Abstract

Forecasting models for bond yields often use macro data to improve their properties. Unfortunately, macro data are not available at frequencies higher than monthly. In order to mitigate this problem, we propose a nonlinear VEC model with conditional heteroskedasticity (NECH) and find that such model has superior in-sample performance than models which fail to encompass nonlinearities and/or GARCH-type effects. Out-of-sample forecasts by our model are marginally superior to competing models; however, the data points we used for evaluating forecasts refer to a period of relative tranquillity on the financial markets, whereas we argue that our model should display superior performance under "unusual" circumstances.

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Bibliographic Info

Paper provided by Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali in its series Working Papers with number 261.

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Length: 23
Date of creation: May 2006
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Handle: RePEc:anc:wpaper:261

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Keywords: conditional heteroskedasticity; forecasting; interest rates; nonlinear cointegration;

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References

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  11. Riccardo LUCCHETTI, 1999. "Analytic Score for Multivariate GARCH Models," Working Papers 119, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
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Cited by:
  1. Luca RICCETTI, 2010. "Minimum Tracking Error Volatility," Working Papers 340, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  2. Fabio FIORILLO & Agnese SACCHI, 2010. "I Want to Free-ride. An Opportunistic View on Decentralization Versus Centralization Problem," Working Papers 346, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  3. Ugo FRATESI, 2010. "The National and International Effects;of Regional Policy Choices: Agglomeration Economies, Peripherality and Territorial Characteristics," Working Papers 344, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

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