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

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 empi...

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Bibliographic Details
Published in:Economic modelling 2018-01, Vol.68, p.145-154
Main Authors: Shang, Yuhuang, Zheng, Tingguo
Format: Article
Language:English
Subjects:
Forecast
Macro factor
Mixed-frequency affine model
State space model
Yield curve
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Summary: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. •A novel mixed-frequency affine model is developed for improving the forecasting of yield curves.•Compared with traditional model, this model offers superior performance for fitting yield curve.•This model can provide more accurate out-of-sample forecast results for a short horizon.
ISSN:0264-9993
1873-6122
DOI:10.1016/j.econmod.2017.07.002