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dc.contributor.authorDuffee, Gregory R.en_US
dc.date.accessioned2011-01-28en_US
dc.date.accessioned2011-09-27T15:21:32Z-
dc.date.available2011-09-27T15:21:32Z-
dc.date.issued2011en_US
dc.identifier.urihttp://hdl.handle.net/10419/49903-
dc.description.abstractNo-arbitrage term structure models impose cross-sectional restrictions among yields and can be used to impose dynamic restrictions on risk compensation. This paper evaluates the importance of these restrictions when using the term structure to forecast future bond yields. It concludes that no cross-sectional restrictions are helpful, because cross-sectional properties of yields are easy to infer with high precision. Dynamic restrictions are useful, but can be imposed without relying on the no-arbitrage structure. In practice, the most important dynamic restriction is that the first principal component of Treasury yields follows a random walk. A simple model built around this assumption produces out-of-sample forecasts that are more accurate than those of a variety of alternative dynamic models.en_US
dc.language.isoengen_US
dc.publisherJohns Hopkins Univ., Dep. of Economics Baltimore, Md.en_US
dc.relation.ispartofseriesWorking papers // the Johns Hopkins University, Department of Economics 576en_US
dc.subject.ddc330en_US
dc.titleForecasting with the term structure: The role of no-arbitrage restrictionsen_US
dc.typeWorking Paperen_US
dc.identifier.ppn644824476en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:Working Papers, Department of Economics, The Johns Hopkins University

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