English, Article, Journal or magazine article edition: Leading indicator properties of the US corporate spreads Nektarios Aslanidis; Andrea Cipollini

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Bookmark: http://trove.nla.gov.au/version/34614
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Leading indicator properties of the US corporate spreads
Author
  • Nektarios Aslanidis
  • Andrea Cipollini
Physical Description
  • preprint
Notes
  • The focus of this paper is on the leading indicator properties of high-yield corporate spreads regarding the level of real economic activity. This is motivated by both the financial accelerator mechanism underlying business cycle fluctuations as suggested by Bernanke and Gertler (1989). We examine the out-of-sample forecast performance of the high-yield spreads regarding employment and industrial production in the US, using both a point forecast and a probability forecast exercise. Our main findings suggest the use of few factors obtained by pooling information from a number of sub sectors high-yield credit spreads. This can be justified by observing that there is a substantial gain from using a Dynamic Factor fitted to credit spreads compared to the prediction produced by benchmarks, such as an AR and ARDL models, where the exogenous regressor is either the term spread, or the aggregate high-yield spread.
  • credit spreads, dynamic factor, forecasting
  • RePEc:mmf:mmfc06:115
Language
  • English
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