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Erschienen in: Journal of Economics and Finance 2/2021

19.08.2020

Empirical analysis of term structure shifts

verfasst von: Joel R. Barber

Erschienen in: Journal of Economics and Finance | Ausgabe 2/2021

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Abstract

Principal component analysis and factor analysis of term structure movements shows that between 80 and 90% of term structure shifts can be explained by a uniform shift that is roughly parallel. In contrast, our analysis of term structure data from 1986 to 2016 reveals that only 57% of the shifts have been uniform. Twist- and butterfly-type shifts accounted for 28 and 10%, respectively, of all shifts. Remarkably, these frequency results are roughly the same for uniform and twist shifts determined on a daily, weekly, and monthly basis over the entire sample and over three subperiods. Based on historical data, an investor should expect a uniform shift in the term structure about 57% and a twist 28% of the time.
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Fußnoten
1
Macaulay (1938) originated the concept of duration. Bierwag et al. (1983) provided an excellent survey of the literature.
 
2
The prices on zero coupon bond, from which the returns were calculated, are based on spot rates implied by in prices of coupon bonds.
 
3
Updated estimates are available from Federal Reserve Board website: http://​www.​federalreserve.​gov/​pubs/​feds/​2006/​200628/​200628abs.​html. The spot rates are continously compounded yields on zero coupon bonds.
 
4
Weekly and monthly changes are defined, respectively, as five and 20 trading days.
 
5
The mean is computed over all shifts of a given type. For example, the mean positive uniform shift is the mean of all positive shifts with no zero crossings.
 
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Metadaten
Titel
Empirical analysis of term structure shifts
verfasst von
Joel R. Barber
Publikationsdatum
19.08.2020
Verlag
Springer US
Erschienen in
Journal of Economics and Finance / Ausgabe 2/2021
Print ISSN: 1055-0925
Elektronische ISSN: 1938-9744
DOI
https://doi.org/10.1007/s12197-020-09521-9

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