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The model improves on the accuracy of point and density forecasts from a no\u2010change random walk and an affine term structure model with stochastic volatility. Our proposed approach may succeed by relaxing the no\u2010arbitrage affine term structure model's requirements that yields obey a factor structure and that the factors follow a Markov process. In the term structure model, its cross\u2010equation no\u2010arbitrage restrictions on the factor loadings appear to play a marginal role in forecasting gains.<\/jats:p>","DOI":"10.1002\/jae.2828","type":"journal-article","created":{"date-parts":[[2021,5,18]],"date-time":"2021-05-18T21:26:36Z","timestamp":1621373196000},"page":"495-516","update-policy":"https:\/\/doi.org\/10.1002\/crossmark_policy","source":"Crossref","is-referenced-by-count":6,"title":["No\u2010arbitrage priors, drifting volatilities, and the term structure of interest rates"],"prefix":"10.1002","volume":"36","author":[{"given":"Andrea","family":"Carriero","sequence":"first","affiliation":[{"name":"Department of Economics Queen Mary, University of London  London UK"},{"name":"Department of Economics University of Bologna  Bologna Italy"}],"role":[{"role":"author","vocabulary":"crossref"}]},{"given":"Todd E.","family":"Clark","sequence":"additional","affiliation":[{"name":"Research Department Federal Reserve Bank of Cleveland  Cleveland Ohio USA"}],"role":[{"role":"author","vocabulary":"crossref"}]},{"given":"Massimiliano","family":"Marcellino","sequence":"additional","affiliation":[{"name":"Department of Economics Bocconi University, IGIER and CEPR  Milan Italy"}],"role":[{"role":"author","vocabulary":"crossref"}]}],"member":"311","published-online":{"date-parts":[[2021,7,10]]},"reference":[{"key":"e_1_2_8_2_1","doi-asserted-by":"publisher","DOI":"10.1080\/07474930701220543"},{"key":"e_1_2_8_3_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jbankfin.2008.07.003"},{"key":"e_1_2_8_4_1","doi-asserted-by":"publisher","DOI":"10.1198\/073500106000000332"},{"key":"e_1_2_8_5_1","doi-asserted-by":"publisher","DOI":"10.1093\/restud\/rdq006"},{"key":"e_1_2_8_6_1","doi-asserted-by":"publisher","DOI":"10.1016\/S0304-3932(03)00032-1"},{"key":"e_1_2_8_7_1","doi-asserted-by":"publisher","DOI":"10.1002\/jae.1137"},{"key":"e_1_2_8_8_1","doi-asserted-by":"publisher","DOI":"10.1080\/07350015.2016.1164707"},{"key":"e_1_2_8_9_1","unstructured":"Bernanke B.(2004).The great moderation. 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