arXiv 21 Dec 2022 · Econometrics · 1 citations (OpenAlex)
arXiv:2212.10790 · PDF · DOI · OpenAlex · Extracted main text
Level, slope, and curvature are three commonly-believed principal components in interest rate term structure and are thus widely used in modeling. This paper characterizes the heterogeneity of how misspecified such models are through time. Presenting the orthonormal basis in the Nelson-Siegel model interpretable as the three factors, we design two nonparametric tests for whether the basis is equivalent to the data-driven functional principal component basis underlying the yield curve dynamics, considering the ordering of eigenfunctions or not, respectively. Eventually, we discover high dispersion between the two bases when rare events occur, suggesting occasional misspecification even if the model is overall expressive.
appendix boundary found by appendix_titled_section at “Appendix A. Proofs” · 74% of the source is main text. Read the extracted text to check this.
The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Grace Xing Hu, Jun Pan \ Jiang Wang (2013) Noise as information for illiquidity | 0.874 | 6 | 2 | 100% |
| 2 | Zening Song, Lijian Yang \ Yuanyuan Zhang (2022) Hypotheses Testing of Functional Principal Components | 0.843 | 5 | 3 | 60% |
| 3 | Charles R Nelson \ Andrew F Siegel (1987) Parsimonious modeling of yield curves | 0.843 | 3 | 3 | 100% |
| 4 | Rama Cont (2005) Modeling term structure dynamics: an infinite dimensional approach | 0.644 | 2 | 2 | 100% |
| 5 | Francis X Diebold \ Canlin Li (2006) Forecasting the term structure of government bond yields | 0.644 | 2 | 2 | 100% |
| 6 | Francis X Diebold, Canlin Li \ Vivian Z Yue (2008) Global yield curve dynamics and interactions: a dynamic Nelson–Siegel approach | 0.644 | 2 | 2 | 100% |
| 7 | Refet S Gürkaynak, Brian Sack \ Jonathan H Wright (2007) The US Treasury yield curve: 1961 to the present | 0.644 | 2 | 2 | 100% |
| 8 | Lars EO Svensson (1994) Estimating and interpreting forward interest rates: Sweden 1992-1994 | 0.644 | 2 | 2 | 100% |
| 9 | Fang Yao, Hans-Georg Müller \ Jane-Ling Wang (2005) Functional data analysis for sparse longitudinal data | 0.511 | 2 | 1 | 100% |
| 10 | Evan Anderson, Lars Peter Hansen \ Thomas Sargent (2000) Robustness, detection and the price of risk | 0.405 | 1 | 1 | 100% |
Showing the top 10 of 50 scored citations.