Forecasting the Leading Indicator of a Recession: The 10-Year minus 3-Month Treasury Yield Spread

Autor:	Joshi, Sudiksha
Rok vydání:	2020
Předmět:	Quantitative Finance - Statistical Finance
Druh dokumentu:	Working Paper
Popis:	In this research paper, I have applied various econometric time series and two machine learning models to forecast the daily data on the yield spread. First, I decomposed the yield curve into its principal components, then simulated various paths of the yield spread using the Vasicek model. After constructing univariate ARIMA models, and multivariate models such as ARIMAX, VAR, and Long Short Term Memory, I calibrated the root mean squared error to measure how far the results deviate from the current values. Through impulse response functions, I measured the impact of various shocks on the difference yield spread. The results indicate that the parsimonious univariate ARIMA model outperforms the richly parameterized VAR method, and the complex LSTM with multivariate data performs equally well as the simple ARIMA model. Comment: 43 pages, 27 figures, 6 tables
Databáze:	arXiv
Externí odkaz:	http://arxiv.org/abs/2009.05507 Zobrazit plný text záznamu View this record from Arxiv