An evaluation of the professional forecasts of U.S. long‐term interest rates

Hamid Baghestani

Review of Financial Economics, 2006, vol. 15, issue 2, 177-191

Abstract: This paper evaluates the multiperiod forecasts of Moody's Aaa corporate and the 10‐year Treasury bond rates from the Survey of Professional Forecasters (SPF). We show that the SPF forecasts are not rational since they fail to be unbiased and, in some cases, do not fully incorporate the information in the past actual rates. These forecasts, however, are useful, since they are able to accurately predict the direction of change in the actual series. We also formulate a model that utilizes the information in the SPF forecasts of the unemployment rate. Comparable four‐quarter‐ahead forecasts of the two interest rates from this model are shown to be significantly more accurate than the corresponding SPF forecasts for 2001.1–2004.4.

Date: 2006
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https://doi.org/10.1016/j.rfe.2005.06.001

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Persistent link: https://EconPapers.repec.org/RePEc:wly:revfec:v:15:y:2006:i:2:p:177-191

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