Curve forecasting by functional autoregression
This paper deals with the prediction of curve-valued autoregression processes. It develops a novel technique, predictive factor decomposition, for the estimation of the autoregression operator. The technique is based on finding a reduced-rank approximation to the autoregression operator that minimizes the expected squared norm of the prediction error. Implementing this idea, we relate the operator approximation problem to the singular value decomposition of a combination of cross-covariance and covariance operators. We develop an estimation method based on regularization of the empirical counterpart of this singular value decomposition, prove its consistency and evaluate convergence rates. The method is illustrated by an example of the term structure of the Eurodollar futures rates. In the sample corresponding to the period of normal growth, the predictive factor technique outperforms the principal components method and performs on a par with custom-designed prediction methods.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 99 (2008)
Issue (Month): 10 (November)
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/622892/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
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.:
- He, Guozhong & Müller, Hans-Georg & Wang, Jane-Ling, 2003. "Functional canonical analysis for square integrable stochastic processes," Journal of Multivariate Analysis, Elsevier, vol. 85(1), pages 54-77, April.
- Robert R. Bliss, 1997. "Movements in the term structure of interest rates," Economic Review, Federal Reserve Bank of Atlanta, issue Q 4, pages 16-33.
When requesting a correction, please mention this item's handle: RePEc:eee:jmvana:v:99:y:2008:i:10:p:2508-2526. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.