The paper identifies leading indicators of the unemployment rate. Forecasts of the unemployment rate are obtained with an econometric model, and with an artificial neural network. Both model-based forecasts outperform forecasts from the Survey of Professional Forecasters. This is important because the unemployment rate forecast from the Survey of Professional Forecasters has outperformed other forecasts based on time-series models to the point that some observers view it as a proxy for a full-information forecast.Business Economics (2006) 41, 37–44; doi:10.2145/20060105
Riding the yield curve is an active portfolio strategy consisting of buying bonds with maturities longer than one's holding period and selling before maturity. The objective is to profit from a higher initial yield and a possible capital gain as the bond “rides” down an upward sloping yield curve. The evidence presented in this paper shows that compared with the buy‐and‐hold, 1‐year rides with 2‐year Treasury securities produce higher average returns, but do not yield excess risk‐adjusted returns. Incremental returns from riding represent term premiums, instead of pure profits. These findings are consistent with the liquidity premium theory of the term structure.
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