The accuracy of interest rate forecasts in the Asia-Pacific region: opportunities for portfolio management

Ibrahim Filiz, Thomas Nahmer, Markus Spiwoks and Kilian Bizer

Applied Economics, 2019, vol. 51, issue 59, 6309-6332

Abstract: We analysed interest rate forecasts from Australia, China, Hong Kong, India, Indonesia, Malaysia, New Zealand, Singapore, South Korea, Taiwan and Thailand. We assessed 532 forecast time series with a total of 85,264 individual interest rate forecasts. To do so, we carried out a comparison to naïve forecasts and investigated the forecast time series for topically orientated trend adjustments. In addition, we deployed the sign accuracy test and the unbiasedness test. The results are very sobering in part: 95.9% of all forecast time series are characterized by the phenomenon of topically orientated trend adjustments, and 99.4% of all forecast time series proved to be biased. Only a small proportion of the forecast time series (3.6%) reflected the future interest rate trend significantly more precisely than a naïve forecast. However, at the same time some of the results of the study are surprisingly positive. The sign accuracy test revealed that 48.3% of all forecast time series predict the interest rate trend significantly better than a random walk forecast.

Date: 2019
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DOI: 10.1080/00036846.2019.1616073

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