This paper proposes a model of the term structure of interest rates that uses macroeconomic to model yield dynamics, and allow for time-varying volatility. Results suggest that the introduction of survey data on market participants' expectations improves significantly the out-of-sample forecasting performance of the model in terms of statistical measures of predictive accuracy. Additionally, we investigate the economic value of yield curve predictability based on an portfolio allocation exercise. Results indicate that modelling time-varying yield volatility is highly relevant and improves the economic relevance of forecasts regardless of the degree of risk aversion considered.
Comissão Organizadora
Anderson Odias da Silva
Claudia Yoshinaga
Ricardo D. Brito
Felipe Saraiva Iachan
Vinicius Augusto Brunassi Silva
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