The Stability of Factor Models of Interest Rates
The daily term structure of interest rates is filtered to reduce the influence of cross-correlations and autocorrelations on its factors. A three-factor model is fitted to the filtered data. We perform statistical tests, finding that factor loadings are unstable through time for daily data. This finding is not due to the presence of outliers nor to the selected number of factors. Such an instability problem can be solved when applying the factor analysis on multivariate scaled residuals, filtered using a nonparametric technique based on functional gradient descent. Copyright 2005, Oxford University Press.
Volume (Year): 3 (2005)
Issue (Month): 3 ()
|Contact details of provider:|| Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK|
Fax: 01865 267 985
Web page: http://jfec.oxfordjournals.org/
More information through EDIRC
|Order Information:||Web: http://www.oup.co.uk/journals|
When requesting a correction, please mention this item's handle: RePEc:oup:jfinec:v:3:y:2005:i:3:p:422-441. 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: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.