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Decision-based forecast evaluation of UK interest rate predictability

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journal contribution
posted on 07.12.2015, 10:55 by Kavita SirichandKavita Sirichand, S.G. Hall
This paper illustrates the importance of density forecasting and forecast evaluation in portfolio decision making. The decision making environment is fully described for an investor seeking to optimally allocate her portfolio between long and short Treasury Bills, over investment horizons of up to two years. We examine the impact of parameter uncertainty and predictability in bond returns on the investorís allocation and we describe how the forecasts are computed and used in this context. Both statistical and decision-based criteria are used to assess the predictability of returns. Our results show sensitivity to the evaluation criterion used and in the context of investment decision making under an economic value criterion, we Önd some potential gain for the investor from assuming predictability.

History

School

  • Business and Economics

Department

  • Business

Published in

Journal of Forecasting

Volume

35

Issue

2

Pages

93-112

Citation

SIRICHAND, K and HALL, S.G., 2016. Decision-based forecast evaluation of UK interest rate predictability. Journal of Forecasting, 35(2), pp.93-112.

Publisher

© Wiley

Version

AM (Accepted Manuscript)

Publisher statement

This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/

Acceptance date

18/08/2015

Publication date

2015-10-15

Copyright date

2016

Notes

This is the peer reviewed version of the following article: SIRICHAND, K and HALL, S.G., 2016. Decision-based forecast evaluation of UK interest rate predictability. Journal of Forecasting, 35(2), pp.93-112., which has been published in final form at http://dx.doi.org/10.1002/for.2369. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.

ISSN

1099-131X

Language

en