Wavelet Neural Network Model for Yield Spread Forecasting
In this study, a hybrid method based on coupling discrete wavelet transforms (DWTs) and artificial neural network (ANN) for yield spread forecasting is proposed. The discrete wavelet transform (DWT) using five different wavelet families is applied to decompose the five different yield spreads constr...
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| Format: | Article |
| Language: | English |
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MDPI AG
2017-11-01
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| Series: | Mathematics |
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| Online Access: | https://www.mdpi.com/2227-7390/5/4/72 |
| _version_ | 1811337177891602432 |
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| author | Firdous Ahmad Shah Lokenath Debnath |
| author_facet | Firdous Ahmad Shah Lokenath Debnath |
| author_sort | Firdous Ahmad Shah |
| collection | DOAJ |
| description | In this study, a hybrid method based on coupling discrete wavelet transforms (DWTs) and artificial neural network (ANN) for yield spread forecasting is proposed. The discrete wavelet transform (DWT) using five different wavelet families is applied to decompose the five different yield spreads constructed at shorter end, longer end, and policy relevant area of the yield curve to eliminate noise from them. The wavelet coefficients are then used as inputs into Levenberg-Marquardt (LM) ANN models to forecast the predictive power of each of these spreads for output growth. We find that the yield spreads constructed at the shorter end and policy relevant areas of the yield curve have a better predictive power to forecast the output growth, whereas the yield spreads, which are constructed at the longer end of the yield curve do not seem to have predictive information for output growth. These results provide the robustness to the earlier results. |
| first_indexed | 2024-04-13T17:51:13Z |
| format | Article |
| id | doaj.art-12c3f1182c414843a440f53f34c36cec |
| institution | Directory Open Access Journal |
| issn | 2227-7390 |
| language | English |
| last_indexed | 2024-04-13T17:51:13Z |
| publishDate | 2017-11-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Mathematics |
| spelling | doaj.art-12c3f1182c414843a440f53f34c36cec2022-12-22T02:36:42ZengMDPI AGMathematics2227-73902017-11-01547210.3390/math5040072math5040072Wavelet Neural Network Model for Yield Spread ForecastingFirdous Ahmad Shah0Lokenath Debnath1Department of Mathematics, University of Kashmir, South Campus, Anantnag-192 101, Jammu and Kashmir, IndiaSchool of Mathematical and Statistical Sciences, University of Texas–Rio Grande Valley, Edinburg, TX 78539, USAIn this study, a hybrid method based on coupling discrete wavelet transforms (DWTs) and artificial neural network (ANN) for yield spread forecasting is proposed. The discrete wavelet transform (DWT) using five different wavelet families is applied to decompose the five different yield spreads constructed at shorter end, longer end, and policy relevant area of the yield curve to eliminate noise from them. The wavelet coefficients are then used as inputs into Levenberg-Marquardt (LM) ANN models to forecast the predictive power of each of these spreads for output growth. We find that the yield spreads constructed at the shorter end and policy relevant areas of the yield curve have a better predictive power to forecast the output growth, whereas the yield spreads, which are constructed at the longer end of the yield curve do not seem to have predictive information for output growth. These results provide the robustness to the earlier results.https://www.mdpi.com/2227-7390/5/4/72waveletneural networkwavelet neural network (WNN)forecastingyield spread |
| spellingShingle | Firdous Ahmad Shah Lokenath Debnath Wavelet Neural Network Model for Yield Spread Forecasting Mathematics wavelet neural network wavelet neural network (WNN) forecasting yield spread |
| title | Wavelet Neural Network Model for Yield Spread Forecasting |
| title_full | Wavelet Neural Network Model for Yield Spread Forecasting |
| title_fullStr | Wavelet Neural Network Model for Yield Spread Forecasting |
| title_full_unstemmed | Wavelet Neural Network Model for Yield Spread Forecasting |
| title_short | Wavelet Neural Network Model for Yield Spread Forecasting |
| title_sort | wavelet neural network model for yield spread forecasting |
| topic | wavelet neural network wavelet neural network (WNN) forecasting yield spread |
| url | https://www.mdpi.com/2227-7390/5/4/72 |
| work_keys_str_mv | AT firdousahmadshah waveletneuralnetworkmodelforyieldspreadforecasting AT lokenathdebnath waveletneuralnetworkmodelforyieldspreadforecasting |