scholarly journals In Search of Leading Indicator Property of Yield Spread for India: An Approach Based on Quantile and Wavelet Regression

2015 ◽  
Vol 2015 ◽  
pp. 1-12 ◽  
Author(s):  
Arif Billah Dar ◽  
Firdous Ahmad Shah
Keyword(s):  
Quantile Regression ◽  
Time Scales ◽  
Economic Activity ◽  
Predictive Power ◽  
Output Growth ◽  
Yield Spread ◽  
Predictive Information ◽  
Yield Spreads ◽  
Wavelet Regression ◽  
Leading Indicator

The leading indicator ability of yield spread for future output growth and inflation is tested for India. Using the yields on securities with maturities ten years and three months to construct yield spread, we study the predictive power of yield spread for output growth and inflation. Our results based on regression of future inflation and output on yield spreads indicate that there is no information in the yield spread about future economic activity and inflation in India. Further, the predictive power of yield spread is analyzed over different quantiles of inflation and output growth using quantile regression; we find that there is again no evidence of predictive information in the yield spreads. Using multiscale wavelet based regression, predictive power is however unveiled at higher time scales for output growth only.

scholarly journals Economic activity forecast in emerging markets

2014 ◽  
Vol 12 (1) ◽  
pp. 325-329 ◽  
Author(s):  
Andre Carvalhal ◽  
Miguel Murillo
Keyword(s):  
Economic Growth ◽  
Emerging Markets ◽  
Emerging Economies ◽  
Economic Activity ◽  
Predictive Power ◽  
Forecasting Model ◽  
Yield Spread ◽  
Fixed Income ◽  
Time Horizons ◽  
Activity Forecast

This paper uses a forecasting model for real economic activity for a group of emerging economies (Brazil, India, Mexico and Russia) based on the information contained in their capital markets. We forecast the industrial production in emerging markets throughout different time horizons using information contained in stock and fixed-income markets. Our results suggest that fixed-income and stock markets do not reveal information regarding future economic growth in Brazil, Mexico and Russia. In the case of India, the yield spread explain part of the variation of the economic activity, but the stock market does not have predictive power.

The relationship of bond yield curves and gross domestic product growth in Scandinavia

2018 ◽  
Vol 4 (10) ◽  
pp. 398-405
Author(s):  
Jana Hvozdenska
Keyword(s):  
Economic Activity ◽  
Predictive Power ◽  
Yield Curve ◽  
Yield Spread ◽  
Gross Domestic Product Growth ◽  
Real Gdp ◽  
Bond Yield ◽  
Near Term ◽  
Relationship Of ◽  
The Relationship

The steepness of the bond yield curve is an excellent indicator of a possible future economic activity. A rise in the short rate tends to flatten the yield curve and slows down real growth in the near-term. This paper analyses the dependence between slope of the yield curve and an economic activity of selected countries between 2000 and 2016. The slope of the yield curve can be measured as the yield spread between sovereign 10-year and 3-month bonds. The results showed that the best predictive lags are the lag of four and five quarters. The results also confirm that 10-year and 3-month yield spread has a significant predictive power for real GDP growth after a financial crisis. These findings can benefit investors and provide evidence of the potential usefulness of the yield curve spreads as indicators of the future economic activity. Keywords: GDP prediction, yield curve, slope, spread.

scholarly journals Stock prices and economic activity nexus in OECD countries: new evidence from an asymmetric panel Granger causality test in the frequency domain

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Veli Yilanci ◽  
Onder Ozgur ◽  
Muhammed Sehid Gorus
Keyword(s):  
Frequency Domain ◽  
Granger Causality ◽  
Stock Prices ◽  
Economic Activity ◽  
Stock Price ◽  
Predictive Power ◽  
Oecd Countries ◽  
Causality Test ◽  
Asymmetric Shocks ◽  
Panel Granger Causality

AbstractThis study investigates the stock price–economic activity nexus in 12 member countries of the Organization for Economic Cooperation and Development (OECD) by employing monthly data over the period 1981:1–2018:3. For this purpose, the study uses Granger causality in the frequency domain in the panel setting by decomposing the symmetric and asymmetric fluctuations. This methodology determines whether the predictive power of interested variables is concentrated on quickly, moderately, or slowly fluctuating components. Our findings show that the stock prices have predictive power for future long-term economic activity in the panel setting. However, economic activity has more reliable information for stock prices for negative components. Additionally, empirical findings for asymmetric shocks are not fully consistent with those of symmetric ones. Besides, the country-specific results provide different causal linkages across members and frequencies. These findings may provide valuable information for policymakers to design proper and effective policies in OECD countries regarding the stock market and economic activity nexus.

scholarly journals Forecasting Large Price Declines of the Nikkei Using the S&P 500 Implied Volatility

2016 ◽  
Vol 8 (1) ◽  
pp. 58
Author(s):  
Chikashi Tsuji
Keyword(s):  
Quantile Regression ◽  
Regression Models ◽  
Implied Volatility ◽  
Predictive Power ◽  
Downside Risk ◽  
Price Changes ◽  
Empirical Results ◽  
Left Tail

This paper empirically examines the forecast power of the previous day’s US implied volatility for large declines of the Nikkei by using several versions of quantile regression models. All our empirical results suggest that the previous day’s US S&P 500 implied volatility has forecast power for large price drops of the Nikkei 225 in Japan. Since we repeatedly and carefully tested the several left tail risks in price changes of the Nikkei and we also tested by using some different versions of quantile regression models, our evidence of the predictive power of the S&P 500 implied volatility for downside risk of the Nikkei is very robust.

scholarly journals A Reexamination of the Predictability of Economic Activity Using the Yield Spread

2002 ◽  
Vol 34 (2) ◽  
pp. 340-360 ◽  
Author(s):  
James D. (James Douglas) Hamilton ◽  
Dong Heon Kim
Keyword(s):  
Economic Activity ◽  
Yield Spread

Investor sentiment and yield spread determinants: evidence from European markets

2013 ◽  
Vol 40 (6) ◽  
pp. 739-762 ◽  
Author(s):  
Spyros Spyrou
Keyword(s):  
Default Risk ◽  
Investor Sentiment ◽  
Yield Spread ◽  
Yield Spreads ◽  
Content Type ◽  
Vector Autoregressive ◽  
Explanatory Variables ◽  
Market Sentiment ◽  
Market Participants ◽  
European Markets

Purpose – This paper aims to investigate the yield spread determinants for a sample of European markets in the light of the recent financial crisis. It utilises findings from two different strands in the literature: findings on bond spread determinants and findings on the effect of investor sentiment on equity returns. Design/methodology/approach – The explanatory variables in the regression models proxy not only for economic fundamentals (e.g. economic activity, default risk, liquidity risk, general market conditions) but also for investor sentiment. A vector autoregressive approach is employed. Findings – The results indicate that fundamental variables are significant for the determination of the level of yield spreads, as suggested by previous studies. Local and international investor sentiment, however, both current and past, is also a statistically significant determinant for both the level and monthly changes of yield, especially during the crisis period 2007-2011. Research limitations/implications – The implication of this finding is significant for all parties involved: government officials, private lenders, EU/ECB/IMF officials, and market participants. Practical implications – Focusing solely on quantitative economic performance indicators may not have the desirable effect of reducing borrowing rates and facilitating the return to economic stability. Perhaps, reassuring and/or sending strong qualitative signals to financial markets may be as important. Involved agents may have to address not only technical financial issues but also the perception that market participants have about the proposed solutions to the crisis and eventually affect market sentiment. Originality/value – The issue of the effect of investor sentiment on government yield spreads during a crisis has not been investigated before.

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