6533b854fe1ef96bd12af460

RESEARCH PRODUCT

Leading indicator properties of US high-yield credit spreads.

Andrea CipolliniNektarios Aslanidis

subject

Economics and EconometricsFinancial economicsjel:C53Industrial productionYield (finance)Real-time dataCredit spreads principal components forecastingPoolingjel:E32jel:C22Economic indicatorPrincipal component analysisEconomicsPrincipal componentReal-time dataPoint forecastCredit spreadCredit spreads Principal components Forecasting Real-time dataForecasting

description

Abstract In this paper we examine the out-of-sample forecast performance of high-yield credit spreads for real-time and revised data regarding employment and industrial production in the US. We evaluate models using both a point forecast and a probability forecast exercise. Our main findings suggest that the best results come from using only a few factors obtained by pooling information from a number of sector-specific high-yield credit spreads. In particular, for employment and at short-run horizons, there is a gain from using a principal components model fitted to high-yield credit spreads compared to the prediction produced by benchmarks. Moreover, forecast results based on revised data are qualitatively similar to those obtained using real-time data.

10.1016/j.jmacro.2009.10.002http://hdl.handle.net/10447/99049