The Yield of Ten-Year T-Bonds: Stumbling Towards a 'Good' Forecast
AbstractDue to their status as "the" benchmark yield for the world's largest government bond market and its importance for US monetary policy, the interest in a "good" forecast of the constant maturity yield of the 10-year U.S. Treasury bond ("T-bond yields") is immense. This paper assesses three univariate time series models for forecasting the yield of T-bonds: It shows that a simple SETAR model proves to be superior to the random walk and an ARMA model. However, dividing the sample of bond yields, dating from 1962 to 2005, into a training sample and a test sample reveals the forecast to be biased. A new bias-corrected version is developed and forecasts for March 2005 to February 2006 are presented. In addition to point estimates forecast limits are also given. --
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Bibliographic InfoPaper provided by Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen in its series Technical Reports with number 2006,50.
Date of creation: 2006
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T-bond; times series; 10-year yield; TAR model; bias-correction; non-linear time series;
Find related papers by JEL classification:
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
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