Correcting estimation bias in dynamic term structure models

Journal of Business and Economic Statistics

Volumn 30, Issue 3, 2012, Pages 454-467

  Bauer, Michael D ^a   Rudebusch, Glenn D ^a   Wu, Jing Cynthia ^b  

^a FEDERAL RESERVE BANK OF SAN FRANCISCO   (United States)

^b UNIVERSITY OF CHICAGO   (United States)

Author keywords

Small sample bias correction; Term premium; Vector autoregression

Indexed keywords

EID: 84864252510     PISSN: 07350015     EISSN: 15372707     Source Type: Journal    
DOI: 10.1080/07350015.2012.693855     Document Type: Article

References (53)

1. Adrian, T., Crump, R. K., and Moench, E. (2012), "Pricing the Term Structure With Linear Regressions, " Staff Report No. 340, Federal Reserve Bank of New York. [456]
2. Amihud, Y., Hurvich, C. M., and Wang, Y. (2009), "Multiple-Predictor Regressions: Hypothesis Testing, " Review of Financial Studies, 22 (1), 413-434. [458]
3. Andrews, D. W. K. (1993), "Exactly Median-Unbiased Estimation of First Order Autoregressive/Unit Root Models, " Econometrica, 61 (1), 139-165. [455,457,458]
4. Ang, A., Boivin, J., and Dong, S. (2009), "Monetary Policy Shifts and the Term Structure, " NBER Working Paper 15270, National Bureau of Economic Research. [457]
5. Ang, A., and Piazzesi, M. (2003), "A No-Arbitrage Vector Autoregression of Term Structure DynamicsWith Macroeconomic and LatentVariables, " Journal of Monetary Economics, 50 (4), 745-787. [455,456,463]
6. Ball, C. A., and Torous, W. N. (1996), "Unit Roots and the Estimation of Interest Rate Dynamics, " Journal of Empirical Finance, 3 (2), 215-238. [455,456,464]
7. Bauer, M. D. (2011), "Bayesian Estimation of Dynamic Term Structure Models Under Restrictions on Risk Pricing, " Working Paper 2011-03, Federal Reserve Bank of San Francisco. [455,456,457,463]
8. Bauer, M. D., Rudebusch, G. D., and Wu, J. C. (2012), "Correcting Estimation Bias in Dynamic Term Structure Models, "Working Paper 2011-12, Federal Reserve Bank of San Francisco. [458]
9. Campbell, J. Y., and Cochrane, J. H. (1999), "By Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior, " Journal of Political Economy, 107 (2), 205-251. [460]
10. Christensen, J. H. E., Diebold, F. X., and Rudebusch, G. D. (2009), "An Arbitrage-Free Generalized Nelson-Siegel Term Structure Model, " Econometrics Journal, 12 (3), C33-C64. [456]
11. Christensen, J. H. E., Diebold, F. X., and Rudebusch, G. D. (2011), "The Affine Arbitrage-Free Class of Nelson-Siegel Term Structure Models, " Journal of Econometrics, 164 (1), 4-20. [454,456,463]
12. Cochrane, J. H., and Piazzesi, M. (2005), "Bond Risk Premia, " American Economic Review, 95 (1), 138-160. [457]
13. Christensen, J. H. E., Diebold, F. X., and Rudebusch, G. D. (2008), "Decomposing the Yield Curve, " unpublished manuscript. Available at http://papers.ssm.com/sol3/papers.cfm?abstract_id=1333274. [455,463]
14. Dai, Q., and Singleton, K. J. (2000), "Specification Analysis of Affine Term Structure Models, " Journal of Finance, 55 (5), 1943-1978. [456]
15. Duffee, G. R. (2002), "Term Premia and Interest Rate Forecasts in Affine Models, " Journal of Finance, 57 (1), 405-443. [456]
16. Duffee, G. R. (2011a), "Forecasting With the Term Structure: The Role of No-Arbitrage, " Working Paper January, Johns Hopkins University. [456,463]
17. Duffee, G. R. (2011b), "Information in (and not in) the Term Structure, " Review of Financial Studies, 24 (9), 2895-2934. [457]
18. Duffee, G. R., and Stanton, R. H. (2004), "Estimation of Dynamic Term Structure Models, " Working Paper, University of California, Haas School of Business. [455,456]
19. Engsted, T., and Pedersen, T. Q. (2012), "Return Predictability and Intertemporal Asset Allocation: Evidence From a Bias-Adjusted VAR Model, " Journal of Empirical Finance, 19 (2), 241-253. [458]
20. Gourieroux, C., Monfort, A., and Renault, E. (1993), "Indirect Inference, " Journal of Applied Econometrics, 8 (S1), S85-S118. [458]
21. Gourieroux, C., Renault, E., and Touzi, N. (2000), "Calibration by Simulation for Small Sample Bias Correction, " in Simulation-Based Inference in Econometrics: Methods and Applications (Chap. 3), eds. R. Mariano, T. Shcuermann, and M. J. Weeks, Cambridge: Cambridge University Press, pp. 328-358. [455,458]
22. Gurkaynak, R. S., Sack, B., and Wright, J. H. (2007), "The U.S. Treasury Yield Curve: 1961 to the Present, " Journal of Monetary Economics, 54 (8), 2291-2304. [463]
23. Hall, P. (1992), The Bootstrap and Edgeworth Expansion, New York: Springer-Verlag. [458]
24. Hamilton, J. D. (1994), Time Series Analysis, Princeton, NJ: Princeton University Press. [457]
25. Hamilton, J. D., andWu, J. C. (2012), "Identification and Estimation ofGaussian Affine Term Structure Models, " Journal of Econometrics, 168 (2), 315-331. [454,456]
26. Hamilton, J. D., andWu, J. C. (in press), "Testable Implications of Affine Term Structure Models, " Journal of Econometrics. [456]
27. Harvey, C. R. (1989), "Time-Varying Conditional Covariances in Tests of Asset Pricing Models, " Journal of Financial Economics, 24 (2), 289-317. [460]
28. Jardet, C., Monfort, A., and Pegoraro, F. (2011), "No-Arbitrage Near-Cointegrated VAR(p) Term Structure Models, Term Premia and GDP Growth, " Working Paper, Banque de France. [455,465]
29. Joslin, S., Priebsch, M., and Singleton, K. J. (2010), "Risk Premiums in Dynamic Term Structure Models With Unspanned Macro Risks, " Working Paper. Available at http://www.stanford.edu/~kenneths/JPS-T.pdf. [455,456,457,463,464]
30. Joslin, S., Singleton, K. J., and Zhu, H. (2011), "A New Perspective on Gaussian Dynamic Term Structure Models, " Review of Financial Studies, 24 (3), 926-970. [454,457]
31. Kendall, M. G. (1954), "A Note on Bias in the Estimation of Autocorrelation, " Biometrika, 41 (3-4), 403-404. [458]
32. Kilian, L. (1998a), "Confidence Intervals for Impulse Responses Under Departures From Normality, " Econometric Reviews, 17 (1), 1-29. [458]
33. Kilian, L. (1998b), "Small-Sample Confidence Intervals for Impulse Response Functions, " Review of Economics and Statistics, 80 (2), 218-230. [458]
34. Kilian, L. (1999), "Finite-Sample Properties of Percentile and Percentile-t Bootstrap Confidence Intervals for Impulse Responses, " Review of Economics and Statistics, 81 (4), 652-660. [458]
35. Kilian, L. (2011), "How Reliable Are Local Projection Estimators of Impulse Responses?, " Review of Economics and Statistics, 93 (4), 1460-1466. [458]
36. Kilian, L., and Zha, T. (2002), "Quantifying the Uncertainty About the Half-Life of Deviations From PPP, " Journal of Applied Econometrics, 17 (2), 107-125. [460,462]
37. Kim, D. H., andOrphanides, A. (2005), "Term Structure EstimationWith Survey Data on InterestRate Forecasts, " Computing in Economics and Finance 2005 474, Society for Computational Economics. [454,455,456,460,463,465]
38. Kim, D. H., and Wright, J. H. (2005), "An Arbitrage-Free Three-Factor Term Structure Model and the Recent Behavior of Long-Term Yields and Distant-Horizon Forward Rates, " Finance and Economics Discussion Series 2005-33, Board of Governors of the Federal Reserve System (U.S.). [455]
39. Kozicki, S., and Tinsley, P. A. (2001), "Shifting Endpoints in the Term Structure of Interest Rates, " Journal of Monetary Economics, 47 (3), 613-652. [455,460]
40. Lustig, H. N., Roussanov, N. L., and Verdelhan, A. (2010), "Countercyclical Currency Risk Premia, " NBER Working Paper 16427, National Bureau of Economic Research. [460]
41. Marriott, F. H. C., and Pope, J. A. (1954), "Bias in the Estimation of Autocorrelations, " Biometrika, 41 (3/4), 390-402. [458]
42. Nicholls, D. F., and Pope, A. L. (1988), "Bias in the Estimation of Multivariate Autoregressions, " Australian & New Zealand Journal of Statistics, 30 (1), 296-309. [457,458]
43. Phillips, P. C. B., and Yu, J. (2009), "Simulation-Based Estimation of Contingent-Claims Prices, " Review of Financial Studies, 22 (9), 3669-3705. [455,458]
44. Pierse, R. G., and Snell, A. J. (1995), "Temporal Aggregation and the Power of Tests for a Unit Root, " Journal of Econometrics, 65 (2), 333-345. [457]
45. Pope, A. L. (1990), "Biases of Estimators in Multivariate Non-Gaussian Autoregressions, " Journal of Time Series Analysis, 11 (3), 249-258. [458]
46. Rudebusch, G. (2007), "Commentary on Cracking the Conundrum, " Brookings Papers on Economic Activity, 38 (1), 317-325. [456]
47. Rudebusch, G. D. (1992), "Trends and RandomWalks inMacroeconomic Time Series: A Re-Examination, " International Economic Review, 33 (3), 661-680. [455,458]
48. Rudebusch, G. D., and Wu, T. (2008), "A Macro-Finance Model of the Term Structure, Monetary Policy, and the Economy, " Economic Journal, 118 (530), 906-926. [456]
49. Schotman, P. C., Tschernig, R., and Budek, J. (2008), "Long Memory and the Term Structure of Risk, " Journal of Financial Econometrics, 6 (4), 459. [465]
50. Stine, R. A., and Shaman, P. (1989), "A Fixed Point Characterization for Bias of Autoregressive Estimators, " The Annals of Statistics, 17 (3), 1275-1284. [458]
51. Tang, C. Y., and Chen, S. X. (2009), "Parameter Estimation and Bias Correction for Diffusion Processes, " Journal of Econometrics, 149 (1), 65-81. [458]
52. Wachter, J. A. (2006), "A Consumption-Based Model of the Term Structure of Interest Rates, " Journal of Financial Economics, 79 (2), 365-399. [460]
53. Wright, J. H. (2011), "Term Premia and Inflation Uncertainty: Empirical Evidence From an International Panel Dataset, " American Economic Review, 101 (4), 1514-1534. [455,457,460]