EconPapers    
Economics at your fingertips  
 

Estimating the term structure with linear regressions: Getting to the roots of the problem

Adam Golinski and Peter Spencer ()

Discussion Papers from Department of Economics, University of York

Abstract: Linear estimators of the affine term structure model are inconsistent since they cannot reproduce the factors used in estimation. This is a serious handicap empirically,giving a worse fit than the conventional ML estimator that ensures consistency. We show that a simple self-consistent estimator can be constructed using the eigenvalue decomposition of a regression estimator. The remaining parameters of the model follow analytically. The fit of this model is virtually indistinguishable from that of the ML estimator. We apply the method to estimate various models of U.S. Treasury yields and a joint model of the U.S. and German yield curves.

Keywords: term structure; linear regression estimators; self-consistent model; estimation methods; two-country model. (search for similar items in EconPapers)
JEL-codes: C13 G12 (search for similar items in EconPapers)
Date: 2019-05
New Economics Papers: this item is included in nep-ecm and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
https://www.york.ac.uk/media/economics/documents/discussionpapers/2019/1905.pdf Main text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:yor:yorken:19/05

Access Statistics for this paper

More papers in Discussion Papers from Department of Economics, University of York Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom. Contact information at EDIRC.
Bibliographic data for series maintained by Paul Hodgson ().

 
Page updated 2020-10-13
Handle: RePEc:yor:yorken:19/05