Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87460
Authors: 
Raviv, Eran
Year of Publication: 
2013
Series/Report no.: 
Tinbergen Institute Discussion Paper 13-041/III
Abstract: 
When the yield curve is modelled using an affine factor model, residuals may still contain relevant information and do not adhere to the familiar white noise assumption.This paper proposes a pragmatic way to improve out of sample performance for yield curve forecasting. The proposed adjustment is illustrated via a pseudo out-of-sample forecasting exercise implementing the widely used Dynamic Nelson Siegel model. Large improvement in forecasting performance is achieved throughout the curve for different forecasting horizons. Results are robust to different time periods, as well as to different model specifications.
Subjects: 
Yield curve
Nelson Siegel
Time varying loadings
Factor models
JEL: 
E43
E47
G17
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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