Forecasting Bonds Yields in the Brazilian Fixed Income Market

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Forecasting Bonds Yields in the Brazilian Fixed Income Market

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Jose Vicente
Benjamin M. Tabak

Additional information is available for the following registered author(s):

Benjamin Miranda Tabak

Abstract

This paper studies the predictive ability of a variety of models in forecasting the yield curve for the Brazilian fixed income market. We compare affine term structure models with a variation of the Nelson-Siegel exponential framework developed by Diebold and Li (2006). Empirical results suggest that forecasts made with the latter methodology are superior and appear accurate at long horizons when compared to different benchmark forecasts. These results are important for policy makers, portfolio and risk managers. Further research could study the predictive ability of such models in other emerging markets.

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Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 141.

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Date of creation: Aug 2007
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Handle: RePEc:bcb:wpaper:141

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Web page: http://www.bcb.gov.br/?english

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Article
- Vicente, José & Tabak, Benjamin M., 2008. "Forecasting bond yields in the Brazilian fixed income market," International Journal of Forecasting, Elsevier, vol. 24(3), pages 490-497. [Downloadable!] (restricted)

This paper has been announced in the following NEP Reports:

NEP-ALL-2007-12-01 (All new papers)
NEP-FMK-2007-12-01 (Financial Markets)
NEP-FOR-2007-12-01 (Forecasting)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Bidarkota, Prasad V., 1998. "The comparative forecast performance of univariate and multivariate models: an application to real interest rate forecasting," International Journal of Forecasting, Elsevier, vol. 14(4), pages 457-468, December. [Downloadable!] (restricted)
Greer, Mark, 2003. "Directional accuracy tests of long-term interest rate forecasts," International Journal of Forecasting, Elsevier, vol. 19(2), pages 291-298. [Downloadable!] (restricted)
Damir Filipovic, 2001. "A general characterization of one factor affine term structure models," Finance and Stochastics, Springer, vol. 5(3), pages 389-412. [Downloadable!] (restricted)
Gregory R. Duffee, 2002. "Term Premia and Interest Rate Forecasts in Affine Models," Journal of Finance, American Finance Association, vol. 57(1), pages 405-443, 02. [Downloadable!] (restricted)
Diebold, Francis X. & Li, Canlin, 2006. "Forecasting the term structure of government bond yields," Journal of Econometrics, Elsevier, vol. 130(2), pages 337-364, February. [Downloadable!] (restricted)
Other versions:
- Francis X. Diebold & Canlin Li, 2003. "Forecasting the Term Structure of Government Bond Yields," NBER Working Papers 10048, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- Francis X. Diebold & Canlin Li, 2004. "Forecasting the Term Structure of Government Bond Yields," CFS Working Paper Series 2004/09, Center for Financial Studies. [Downloadable!]
- Francis X. Diebold & Canlin Li, 2002. "Forecasting the Term Structure of Government Bond Yields," Center for Financial Institutions Working Papers 02-34, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
Nelson, Charles R & Siegel, Andrew F, 1987. "Parsimonious Modeling of Yield Curves," Journal of Business, University of Chicago Press, vol. 60(4), pages 473-89, October. [Downloadable!] (restricted)
Eduardo J. A. Lima & Felipe Luduvice & Benjamin M. Tabak, 2006. "Forecasting Interest Rates: an application for Brazil," Working Papers Series 120, Central Bank of Brazil, Research Department. [Downloadable!]
Caio Ibsen R. Almeida & José Valentim M. Vicente, 2006. "Term Structure Movements Implicit in Option Prices," Working Papers Series 128, Central Bank of Brazil, Research Department. [Downloadable!]
Andrew Ang & Monika Piazzesi, 2001. "A No-Arbitrage Vector Autoregression of Term Structure Dynamics with Macroeconomic and Latent Variables," NBER Working Papers 8363, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Ang, Andrew & Piazzesi, Monika, 2003. "A no-arbitrage vector autoregression of term structure dynamics with macroeconomic and latent variables," Journal of Monetary Economics, Elsevier, vol. 50(4), pages 745-787, May. [Downloadable!] (restricted)

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