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Leading indicator properties of US high-yield credit spreads

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  • Andrea Cipollini

    ()

  • Nektarios Aslanidis

    ()

Abstract

In this paper we examine the out-of-sample forecast performance of high-yield credit spreads regarding employment and industrial production in the US, using both a point forecast and a probability forecast exercise. Our main findings suggest the use of few factors obtained by pooling information from a number of sector-specific high-yield credit spreads. This can be justified by observing that there is a gain from using a principal components model fitted to high-yield credit spreads compared to the prediction produced by benchmarks, such as an AR, and ARDL models that use either the term spread or the aggregate high-yield spread as exogenous regressor.

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File URL: http://www.recent.unimore.it/wp/RECent-wp6.pdf
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Bibliographic Info

Paper provided by University of Modena and Reggio E., Dept. of Economics in its series Center for Economic Research (RECent) with number 006.

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Length: pages 31
Date of creation: Oct 2007
Date of revision:
Handle: RePEc:mod:recent:006

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Web page: http://www.recent.unimore.it/
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Keywords: Credit spreads; principal components; forecasting;

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