{"status":"ok","message-type":"work","message-version":"1.0.0","message":{"indexed":{"date-parts":[[2026,6,28]],"date-time":"2026-06-28T06:01:31Z","timestamp":1782626491963,"version":"3.54.5"},"reference-count":64,"publisher":"Wiley","issue":"5","license":[{"start":{"date-parts":[[2020,7,13]],"date-time":"2020-07-13T00:00:00Z","timestamp":1594598400000},"content-version":"vor","delay-in-days":0,"URL":"http:\/\/onlinelibrary.wiley.com\/termsAndConditions#vor"}],"content-domain":{"domain":["onlinelibrary.wiley.com"],"crossmark-restriction":true},"short-container-title":["J of Applied Econometrics"],"published-print":{"date-parts":[[2020,8]]},"abstract":"<jats:title>Summary<\/jats:title><jats:p>In the context of predicting the term structure of interest rates, we explore the marginal predictive content of real\u2010time macroeconomic diffusion indexes extracted from a \u201cdata rich\u201d real\u2010time data set, when used in dynamic Nelson\u2013Siegel (NS) models of the variety discussed in Svensson (NBER technical report, 1994; NSS) and Diebold and Li (<jats:italic>Journal of Econometrics<\/jats:italic>, 2006, <jats:italic>130<\/jats:italic>, 337\u2013364; DNS). Our diffusion indexes are constructed using principal component analysis with both targeted and untargeted predictors, with targeting done using the lasso and elastic net. Our findings can be summarized as follows. First, the marginal predictive content of real\u2010time diffusion indexes is significant for the preponderance of the <jats:italic>individual<\/jats:italic> models that we examine. The exception to this finding is the post \u201cGreat Recession\u201d period. Second, forecast <jats:italic>combinations<\/jats:italic> that include only yield variables result in our most accurate predictions, for most sample periods and maturities. In this case, diffusion indexes do not have marginal predictive content for yields and do not seem to reflect unspanned risks. This points to the continuing usefulness of DNS and NSS models that are purely yield driven. Finally, we find that the use of fully revised macroeconomic data may have an important confounding effect upon results obtained when forecasting yields, as prior research has indicated that diffusion indexes are often useful for predicting yields when constructed using fully revised data, regardless of whether forecast combination is used, or not. Nevertheless, our findings also underscore the potential importance of using machine learning, data reduction, and shrinkage methods in contexts such as term structure modeling.<\/jats:p>","DOI":"10.1002\/jae.2768","type":"journal-article","created":{"date-parts":[[2020,4,26]],"date-time":"2020-04-26T10:04:51Z","timestamp":1587895491000},"page":"587-613","update-policy":"https:\/\/doi.org\/10.1002\/crossmark_policy","source":"Crossref","is-referenced-by-count":16,"title":["Predicting interest rates using shrinkage methods, real\u2010time diffusion indexes, and model combinations"],"prefix":"10.1002","volume":"35","author":[{"given":"Norman R.","family":"Swanson","sequence":"first","affiliation":[{"name":"Department of Economics Rutgers University  New Brunswick New Jersey United States"}],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Weiqi","family":"Xiong","sequence":"additional","affiliation":[{"name":"BlackRock  Hong Kong"}],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Xiye","family":"Yang","sequence":"additional","affiliation":[{"name":"Department of Economics Rutgers University  New Brunswick New Jersey United States"}],"role":[{"vocabulary":"crossref","role":"author"}]}],"member":"311","published-online":{"date-parts":[[2020,7,13]]},"reference":[{"key":"e_1_2_10_2_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jfineco.2013.04.009"},{"key":"e_1_2_10_3_1","doi-asserted-by":"publisher","DOI":"10.1002\/jae.2588"},{"key":"e_1_2_10_4_1","unstructured":"Andreou E. Gagliardini P. Ghysels E. &Rubin M.(2018).Is industrial production still the dominant factor for the us economy? Evidence from a new class of mixed frequency (group) factor models\u00a0(Research Paper No.\u00a016\u201011). Zurich Switzerland: Swiss Finance Institute."},{"key":"e_1_2_10_5_1","doi-asserted-by":"publisher","DOI":"10.1016\/S0304-3932(03)00032-1"},{"key":"e_1_2_10_6_1","doi-asserted-by":"publisher","DOI":"10.1111\/1468-0262.00273"},{"key":"e_1_2_10_7_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jeconom.2005.01.015"},{"key":"e_1_2_10_8_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jeconom.2008.08.010"},{"key":"e_1_2_10_9_1","doi-asserted-by":"publisher","DOI":"10.1002\/jae.1063"},{"key":"e_1_2_10_10_1","doi-asserted-by":"publisher","DOI":"10.1016\/S1574-8715(07)00204-7"},{"key":"e_1_2_10_11_1","doi-asserted-by":"publisher","DOI":"10.1080\/07350015.2012.693855"},{"key":"e_1_2_10_12_1","doi-asserted-by":"publisher","DOI":"10.1016\/S0304-3932(03)00024-2"},{"key":"e_1_2_10_13_1","unstructured":"BIS(2005).Zero\u2010coupon yield curves\u00a0(Technical report). Basel Switzerland: Bank for International Settlements."},{"key":"e_1_2_10_14_1","doi-asserted-by":"crossref","unstructured":"Boivin J. &Ng S.(2005).Understanding and comparing factor\u2010based forecasts\u00a0(Working paper). Cambridge MA: National Bureau of Economic Research.","DOI":"10.3386\/w11285"},{"key":"e_1_2_10_15_1","doi-asserted-by":"publisher","DOI":"10.1080\/07350015.2016.1186029"},{"key":"e_1_2_10_16_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jeconom.2015.02.010"},{"key":"e_1_2_10_17_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jeconom.2011.02.011"},{"key":"e_1_2_10_18_1","doi-asserted-by":"publisher","DOI":"10.1093\/jjfinec\/nbu010"},{"key":"e_1_2_10_19_1","doi-asserted-by":"publisher","DOI":"10.1108\/S0731-905320150000035003"},{"key":"e_1_2_10_20_1","doi-asserted-by":"publisher","DOI":"10.1111\/j.1468-2354.2009.00533.x"},{"key":"e_1_2_10_21_1","doi-asserted-by":"publisher","DOI":"10.1080\/07350015.2015.1052456"},{"key":"e_1_2_10_22_1","unstructured":"Coroneo L. &Iacone F.(2018).Comparing predictive accuracy in small samples using fixed\u2010smoothing asymptotics\u00a0(Working paper). York UK: University of York."},{"key":"e_1_2_10_23_1","doi-asserted-by":"publisher","DOI":"10.1016\/S1574-0706(05)01005-0"},{"key":"e_1_2_10_24_1","doi-asserted-by":"publisher","DOI":"10.1111\/j.1468-2354.2007.00418.x"},{"key":"e_1_2_10_25_1","doi-asserted-by":"crossref","unstructured":"De Pooter M.(2007).Examining the Nelson\u2013Siegel class of term structure models: In\u2010sample fit versus out\u2010of\u2010sample forecasting performance\u00a0(Working Paper No.\u00a007\u2010043\/4). Amsterdam Netherlands: Tinbergen Institute.","DOI":"10.2139\/ssrn.992748"},{"key":"e_1_2_10_26_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jeconom.2005.03.005"},{"key":"e_1_2_10_27_1","doi-asserted-by":"publisher","DOI":"10.1198\/073500102753410444"},{"key":"e_1_2_10_28_1","doi-asserted-by":"publisher","DOI":"10.1080\/01621459.1991.10475085"},{"key":"e_1_2_10_29_1","doi-asserted-by":"publisher","DOI":"10.1515\/9781400845415"},{"key":"e_1_2_10_30_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jeconom.2005.01.011"},{"key":"e_1_2_10_31_1","doi-asserted-by":"publisher","DOI":"10.1093\/rfs\/hhr033"},{"key":"e_1_2_10_32_1","first-page":"385","volume-title":"Handbook of economic forecasting","author":"Duffee G. R.","year":"2013"},{"key":"e_1_2_10_33_1","doi-asserted-by":"publisher","DOI":"10.1002\/for.1258"},{"key":"e_1_2_10_34_1","doi-asserted-by":"publisher","DOI":"10.1093\/rfs\/hhx098"},{"key":"e_1_2_10_35_1","volume-title":"Applied economic forecasting using time series methods","author":"Ghysels E.","year":"2018"},{"key":"e_1_2_10_36_1","doi-asserted-by":"publisher","DOI":"10.1002\/jae.1177"},{"key":"e_1_2_10_37_1","doi-asserted-by":"publisher","DOI":"10.1111\/j.1468-0262.2006.00718.x"},{"key":"e_1_2_10_38_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jmoneco.2007.06.029"},{"key":"e_1_2_10_39_1","doi-asserted-by":"publisher","DOI":"10.1257\/jel.50.2.331"},{"key":"e_1_2_10_40_1","doi-asserted-by":"publisher","DOI":"10.1086\/209678"},{"key":"e_1_2_10_41_1","doi-asserted-by":"publisher","DOI":"10.1111\/j.1538-4616.2011.00477.x"},{"key":"e_1_2_10_42_1","unstructured":"Hansen P. R. &Timmermann A.(2012).Choice of sample split in out\u2010of\u2010sample forecast evaluation\u00a0(Working paper). Florence Italy: European University Institute."},{"key":"e_1_2_10_43_1","doi-asserted-by":"publisher","DOI":"10.3982\/ECTA13372"},{"key":"e_1_2_10_44_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jeconom.2013.08.033"},{"key":"e_1_2_10_45_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.ijforecast.2016.02.012"},{"key":"e_1_2_10_46_1","doi-asserted-by":"publisher","DOI":"10.1057\/9781137401823"},{"key":"e_1_2_10_47_1","doi-asserted-by":"publisher","DOI":"10.1214\/aos\/1176347265"},{"key":"e_1_2_10_48_1","doi-asserted-by":"publisher","DOI":"10.1093\/rfs\/hhp081"},{"key":"e_1_2_10_49_1","doi-asserted-by":"publisher","DOI":"10.1016\/S0304-4076(00)00022-1"},{"key":"e_1_2_10_50_1","doi-asserted-by":"publisher","DOI":"10.1080\/07350015.2015.1086655"},{"key":"e_1_2_10_51_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jeconom.2008.06.002"},{"key":"e_1_2_10_52_1","doi-asserted-by":"publisher","DOI":"10.1086\/296409"},{"key":"e_1_2_10_53_1","doi-asserted-by":"publisher","DOI":"10.1080\/07350015.2012.693850"},{"key":"e_1_2_10_54_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jeconom.2011.02.020"},{"key":"e_1_2_10_55_1","doi-asserted-by":"publisher","DOI":"10.1111\/j.1468-0297.2008.02155.x"},{"key":"e_1_2_10_56_1","doi-asserted-by":"publisher","DOI":"10.1002\/for.1026"},{"key":"e_1_2_10_57_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.econlet.2009.12.036"},{"key":"e_1_2_10_58_1","unstructured":"Stark T.(2010).Realistic evaluation of real\u2010time forecasts in the Survey of Professional Forecasters\u00a0(Research Papers in Economics Vol.\u00a01). Philadelphia PA: Federal Reserve Bank of Philadelphia Research Division."},{"key":"e_1_2_10_59_1","doi-asserted-by":"publisher","DOI":"10.1198\/016214502388618960"},{"key":"e_1_2_10_60_1","doi-asserted-by":"publisher","DOI":"10.1198\/073500102317351921"},{"key":"e_1_2_10_61_1","doi-asserted-by":"publisher","DOI":"10.1080\/07350015.2012.715956"},{"key":"e_1_2_10_62_1","doi-asserted-by":"crossref","unstructured":"Svensson L. E.(1994).Estimating and interpreting forward interest rates: Sweden 1992\u20131994\u00a0(NBER Working Paper No.\u00a04871). Cambridge MA: National Bureau of Economic Research.","DOI":"10.3386\/w4871"},{"key":"e_1_2_10_63_1","doi-asserted-by":"publisher","DOI":"10.1111\/caje.12336"},{"key":"e_1_2_10_64_1","doi-asserted-by":"publisher","DOI":"10.1016\/S1574-0706(05)01004-9"},{"key":"e_1_2_10_65_1","doi-asserted-by":"publisher","DOI":"10.1111\/jmcb.12300"}],"container-title":["Journal of Applied Econometrics"],"original-title":[],"language":"en","link":[{"URL":"https:\/\/onlinelibrary.wiley.com\/doi\/pdf\/10.1002\/jae.2768","content-type":"application\/pdf","content-version":"vor","intended-application":"text-mining"},{"URL":"https:\/\/onlinelibrary.wiley.com\/doi\/full-xml\/10.1002\/jae.2768","content-type":"application\/xml","content-version":"vor","intended-application":"text-mining"},{"URL":"https:\/\/onlinelibrary.wiley.com\/doi\/pdf\/10.1002\/jae.2768","content-type":"unspecified","content-version":"vor","intended-application":"similarity-checking"}],"deposited":{"date-parts":[[2023,8,30]],"date-time":"2023-08-30T01:57:05Z","timestamp":1693360625000},"score":1,"resource":{"primary":{"URL":"https:\/\/onlinelibrary.wiley.com\/doi\/10.1002\/jae.2768"}},"subtitle":[],"short-title":[],"issued":{"date-parts":[[2020,7,13]]},"references-count":64,"journal-issue":{"issue":"5","published-print":{"date-parts":[[2020,8]]}},"alternative-id":["10.1002\/jae.2768"],"URL":"https:\/\/doi.org\/10.1002\/jae.2768","archive":["Portico"],"relation":{},"ISSN":["0883-7252","1099-1255"],"issn-type":[{"value":"0883-7252","type":"print"},{"value":"1099-1255","type":"electronic"}],"subject":[],"published":{"date-parts":[[2020,7,13]]},"assertion":[{"value":"2018-05-09","order":0,"name":"received","label":"Received","group":{"name":"publication_history","label":"Publication History"}},{"value":"2020-03-20","order":1,"name":"accepted","label":"Accepted","group":{"name":"publication_history","label":"Publication History"}},{"value":"2020-07-13","order":2,"name":"published","label":"Published","group":{"name":"publication_history","label":"Publication History"}}]}}