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Leading indicator properties of US high-yield credit spreads

Andrea Cipollini () and Nektarios Aslanidis ()

Center for Economic Research (RECent) from University of Modena and Reggio E., Dept. of Economics "Marco Biagi"

Abstract: In this paper we examine the out-of-sample forecast performance of high-yield credit spreads regarding employment and industrial production in the US, using both a point forecast and a probability forecast exercise. Our main findings suggest the use of few factors obtained by pooling information from a number of sector-specific high-yield credit spreads. This can be justified by observing that there is a gain from using a principal components model fitted to high-yield credit spreads compared to the prediction produced by benchmarks, such as an AR, and ARDL models that use either the term spread or the aggregate high-yield spread as exogenous regressor.

Keywords: Credit spreads; principal components; forecasting (search for similar items in EconPapers)
JEL-codes: C22 C53 E32 (search for similar items in EconPapers)
Pages: pages 31
Date: 2007-10
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Related works:
Journal Article: Leading indicator properties of US high-yield credit spreads (2010) Downloads
Working Paper: Leading indicator properties of US high-yield credit spreads (2009) Downloads
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