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Intelligible factors for the yield curve

Lengwiler, Yvan and Lenz, Carlos. (2010) Intelligible factors for the yield curve. Journal of Econometrics, Vol. 157, No. 2. pp. 481-491.

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Official URL: http://edoc.unibas.ch/dok/A5265550

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Abstract

We construct a factor model of the yield curve and specify time series processes for these factors, so that the innovations are mutually orthogonal. At the same time, the factors are such that they assume clear, intuitive interpretations. The resulting ”intelligible factors” should prove useful for investment professionals to discuss expectations about yield curves and the implied dynamics. Moreover, they allow us to distinguish announced changes of the monetary policy stance versus monetary policy surprises, which we find to be rare. We identify two such events, namely September 11, 2001, and the Fed reaction to the sub-prime crisis of 2007.
Faculties and Departments:06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften > Professuren Wirtschaftswissenschaften > Finanzmärkte (Lengwiler)
UniBasel Contributors:Lengwiler, Yvan
Item Type:Article, refereed
Article Subtype:Research Article
Bibsysno:Link to catalogue
Publisher:Elsevier
ISSN:0304-4076
Note:Publication type according to Uni Basel Research Database: Journal article
Last Modified:14 Sep 2012 06:56
Deposited On:22 Mar 2012 14:16

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