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Deconstructing the yield curve
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| Authors and Corporations: | , |
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| Other Authors: | Gospodinov, Nikolaj [Author] |
| Type of Resource: | E-Book |
| Language: | English |
| published: | |
| Series: |
Federal Reserve Bank of New York: Staff reports ; no. 884 (April 2019)
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| Subjects: | |
| Source: | Verbunddaten SWB Lizenzfreie Online-Ressourcen |
| Summary: | We investigate the factor structure of the term structure of interest rates and argue that characterizing the minimal dimension of the data-generating process is more challenging than currently appreciated. To circumvent these difficulties, we introduce a novel nonparametric bootstrap that is robust to general forms of time and cross-sectional dependence and conditional heteroskedasticity of unknown form. We show that our bootstrap procedure is asymptotically valid and exhibits excellent finite-sample properties in simulations. We demonstrate the applicability of our results in two empirical exercises: First, we show that measures of equity market tail risk and the state of the macroeconomy predict bond returns beyond the level or slope of the yield curve; second, we provide a bootstrap-based bias correction and confidence intervals for the probability of recession based on the shape of the yield curve. Our results apply more generally to all assets with a finite maturity structure. |
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| Physical Description: | 1 Online-Ressource (circa 67 Seiten); Illustrationen |