Predicting short-term interest rates using Bayesian model averaging: Evidence from weekly and high frequency data

Chew Chua, Sandy Suardi and Sarantis Tsiaplias

International Journal of Forecasting, 2013, vol. 29, issue 3, 442-455

Abstract: This paper examines the forecasting performance of Bayesian model averaging (BMA) for a set of single factor models of short-term interest rates. Using weekly and high frequency data for the one-month Eurodollar rate, BMA produces predictive likelihoods that are considerably better than those associated with the majority of the short-rate models, but marginally worse than those of the best model in each dataset. We also find that BMA forecasts based on recent predictive likelihoods are preferred to those based on the marginal likelihood of the entire dataset.

Keywords: Bayesian model averaging; Short-term interest rates; Out-of-sample forecasts (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:29:y:2013:i:3:p:442-455

DOI: 10.1016/j.ijforecast.2012.10.003

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