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Fitting and forecasting yield curves with a mixed-frequency affine model: Evidence from China

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  • Shang, Yuhuang
  • Zheng, Tingguo

Abstract

This paper proposes a novel mixed-frequency affine term structure model to improving the fit and forecasting ability of yield curves. We also show the Bayesian estimation method related to this mixed-frequency model. Then we conduct an empirical study using Chinese macro and financial data. The empirical results show that compared with the traditional same-frequency affine model, the mixed-frequency affine model offers superior performance for fitting the yield curve and term structure factors. Specifically, this mixed-frequency affine model can provide more accurate out-of-sample forecast results of the yield curve.

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  • Shang, Yuhuang & Zheng, Tingguo, 2018. "Fitting and forecasting yield curves with a mixed-frequency affine model: Evidence from China," Economic Modelling, Elsevier, vol. 68(C), pages 145-154.
    • Handle: RePEc:eee:ecmode:v:68:y:2018:i:c:p:145-154
    DOI: 10.1016/j.econmod.2017.07.002
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    1. João Frois Caldeira & Rangan Gupta & Muhammad Tahir Suleman & Hudson S. Torrent, 2021. "Forecasting the Term Structure of Interest Rates of the BRICS: Evidence from a Nonparametric Functional Data Analysis," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(15), pages 4312-4329, December.
    2. Shang, Yuhuang & Zheng, Tingguo, 2021. "Mixed-frequency SV model for stock volatility and macroeconomics," Economic Modelling, Elsevier, vol. 95(C), pages 462-472.
    3. Erhard RESCHENHOFER & Thomas STARK, 2019. "Forecasting the Yield Curve with Dynamic Factors," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 101-113, March.
    4. Candelon, Bertrand & Moura, Rubens, 2023. "Sovereign yield curves and the COVID-19 in emerging markets," Economic Modelling, Elsevier, vol. 127(C).

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