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Title: Adaptive dynamic Nelson-Siegel term structure model with applications
Authors: Chen, Y. 
Niu, L.
Keywords: Forecasting
Local parametric models
Term structure of interest rates
Yield curve
Issue Date: 2014
Citation: Chen, Y., Niu, L. (2014). Adaptive dynamic Nelson-Siegel term structure model with applications. Journal of Econometrics 180 (1) : 98-115. ScholarBank@NUS Repository.
Abstract: We propose an Adaptive Dynamic Nelson-Siegel (ADNS) model to adaptively detect parameter changes and forecast the yield curve. The model is simple yet flexible and can be safely applied to both stationary and nonstationary situations with different sources of parameter changes. For the 3- to 12-months ahead out-of-sample forecasts of the US yield curve from 1998:1 to 2010:9, the ADNS model dominates both the popular reduced-form and affine term structure models; compared to random walk prediction, the ADNS steadily reduces the forecast error measurements by between 20% and 60%. The locally estimated coefficients and the identified stable subsamples over time align with policy changes and the timing of the recent financial crisis. © 2013 Elsevier B.V. All rights reserved.
Source Title: Journal of Econometrics
ISSN: 03044076
DOI: 10.1016/j.jeconom.2014.02.009
Appears in Collections:Staff Publications

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