This paper investigates the predictability of exchange rate changes by extracting the factors from the three-, four-, and five-factor model of the relative Nelson-Siegel class. Our empirical analysis shows that the relative spread factors are important for predicting future exchange rate...

Stock market prediction has always caught the attention of many analysts and researchers. Popular theories suggest that stock markets are essentially a random walk and it is a fool’s game to try and predict them. Predicting stock prices is a challenging problem in itself because of the number...

This study developed an investment framework to implement dynamic factor rotation strategies according to changes in economic conditions. I constructed a useful macro indicator that tracked real-time business cycles of the US economy and applied a trend-filtering method to the indicator to...

The Baker and Wurgler (2006) sentiment index purports to measure irrational investor sentiment, while the University of Michigan Consumer Sentiment Index is designed to largely reflect fundamentals. Removing this fundamental component from the Baker and Wurgler index creates an index of investor...

In this paper, we examined and compared the forecast performances of the dynamic Nelson–Siegel (DNS), dynamic Nelson–Siegel–Svensson (DNSS), and arbitrage-free Nelson–Siegel (AFNS) models after the financial crisis period. The best model for the forecast performance is the DNSS model in...