Reconstructing the Yield Curve

Yan Liu and Jing Cynthia Wu

No 27266, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The constant-maturity zero-coupon Treasury yield curve is one of the most studied datasets. We reconstruct the yield curve using a non-parametric kernel-smoothing method with a novel adaptive bandwidth specifically designed to fit the Treasury yield curve. Our curve is globally smooth while still capturing important local variation. Economically, we show that applying our data leads to different conclusions from using the leading alternative data of Gürkaynak et al. (2007) (GSW) when we repeat two popular studies of Cochrane and Piazzesi (2005) and Giglio and Kelly (2018). Statistically, we show our dataset preserves information in the raw data and has much smaller pricing errors than GSW. Our new yield curve is maintained and updated online, complemented by bandwidths that summarize information content in the raw data.

JEL-codes: E43 (search for similar items in EconPapers)
Date: 2020-05
New Economics Papers: this item is included in nep-fmk and nep-mac
Note: AP EFG ME
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Citations: View citations in EconPapers (4)

Published as Yan Liu & Jing Cynthia Wu, 2021. "Reconstructing the yield curve," Journal of Financial Economics, vol 142(3), pages 1395-1425.

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Journal Article: Reconstructing the yield curve (2021)
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