Forecasting the term structure of interest rates for Turkey: a factor analysis approach

• Autores: C. Emre Alper, K. Kazimov, A. Akdemir
• Localización: Applied financial economics, ISSN 0960-3107, Vol. 17, Nº. 1-3, 2007, págs. 77-85
• Idioma: inglés
• DOI: 10.1080/09603100600606156
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• Resumen

  • We perform factor analysis on monthly yield curves estimated by Nelson-Siegel model using the Turkish secondary government securities market data. Monthly yield curves are characterized by three factors which are estimated using nominal volume-weighted average monthly zero-coupon yields. According to the loadings of each factor, we label the factors as level, slope and curvature. Next, we forecast yield curves using AR-GARCH and random walk processes and compare their relative performance. Our results indicate that the three factor model has high explanatory power and that the AR-GARCH specification has superior forecasting power for Turkey.