The Nobel Memorial Prize for Robert F. Engle



Table 6

Out-of-Sample 12-month-Ahead Forecasting Results

Nelson-Siegel with AR(1) Factor Dynamics

Maturity (j)

Mean

Std. Dev.

RMSE

P(12)

P(24)

3 months

0.150

0.724

0.739

-0.288

0.001

1 year

0.173

0.823

0.841

-0.332

-0.004

3 years

-0.123

0.910

0.918

-0.408

0.015

5 years

-0.337

0.918

0.978

-0.412

0.003

10 years

-0.531

0.825

0.981

-0.433

-0.003

Nelson-Siegel with VAR(1) Factor Dynamics

Maturity (j)

Mean

Std. Dev.

RMSE

P(12)

P(24)

3 months

-0.463

1.000

1.102

-0.163

-0.111

1 year

-0.416

1.224

1.293

-0.265

-0.065

3 years

-0.576

1.268

1.393

-0.317

-0.036

5 years

-0.673

1.210

1.385

-0.315

-0.039

10 years

-0.721

1.056

1.279

-0.299

-0.037

Random Walk

Maturity (j)

Mean

Std. Dev.

RMSE

P(12)

P(24)

3 months

0.416

0.930

1.019

-0.118

-0.109

1 year

0.388

1.132

1.197

-0.268

-0.019

3 years

0.236

1.214

1.237

-0.419

0.060

5 years

0.130

1.184

1.191

-0.481

0.072

10 years

-0.033

1.051

1.052

-0.508

0.069

Slope Regression

Maturity ( τ )

Mean

Std. Dev.

RMSE

P(12)

P(24)

3 months

NA

NA

NA

NA

NA

1 year

0.896

1.235

1.526

-0.187

-0.024

3 years

0.641

1.316

1.464

-0.212

0.024

5 years

0.515

1.305

1.403

-0.255

0.035

10 years

0.362

1.208

1.261

-0.268

0.042



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