TY - JOUR
T1 - Forecasting the intraday market price of money
AU - Monticini, Andrea
AU - Ravazzolo, Francesco
PY - 2014
Y1 - 2014
N2 - Central banks' operations and efficiency arguments would suggest that the intraday interest rate should be set to zero. However, a liquidity crisis introduces frictions related to news, which can cause an upward jump of the intraday rate. This paper documents that these dynamics can be partially predicted during turbulent times. Long memory approaches alone or in combination to account for model uncertainty outperform random walk, autoregressive and moving average benchmarks in terms of point and density forecasting. The relative accuracy is higher when the full distribution is predicted. We also document that such statistical accuracy can provide economic gains in investment strategies based on lending in the intraday market.
AB - Central banks' operations and efficiency arguments would suggest that the intraday interest rate should be set to zero. However, a liquidity crisis introduces frictions related to news, which can cause an upward jump of the intraday rate. This paper documents that these dynamics can be partially predicted during turbulent times. Long memory approaches alone or in combination to account for model uncertainty outperform random walk, autoregressive and moving average benchmarks in terms of point and density forecasting. The relative accuracy is higher when the full distribution is predicted. We also document that such statistical accuracy can provide economic gains in investment strategies based on lending in the intraday market.
KW - Forecasting
KW - Interbank market
KW - Forecasting
KW - Interbank market
UR - https://publicatt.unicatt.it/handle/10807/64640
UR - https://www.scopus.com/inward/citedby.uri?partnerID=HzOxMe3b&scp=85027938443&origin=inward
UR - https://www.scopus.com/inward/record.uri?partnerID=HzOxMe3b&scp=85027938443&origin=inward
U2 - 10.1016/j.jempfin.2014.08.006
DO - 10.1016/j.jempfin.2014.08.006
M3 - Article
SN - 0927-5398
VL - 29
SP - 304
EP - 315
JO - Journal of Empirical Finance
JF - Journal of Empirical Finance
IS - Dicembre
ER -