Principal component regression in GAMLSS applied to Greek-German government bond yield spreads

Stasinopoulos, Dimitrios, Rigby, Robert A., Georgikopoulos, Nikolaos and De Bastiani, Fernanda (2021) Principal component regression in GAMLSS applied to Greek-German government bond yield spreads. Statistical Modelling, 22 (1-2). pp. 127-145. ISSN 1477-0342

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Abstract / Description

A solution to the problem of having to deal with a large number of interrelated explanatory variables within a generalized additive model for location, scale, and shape (GAMLSS) is given here using as an example the Greek-German government bond yield spreads from the 25th of April 2005 to the 31th of March 2010. Those were turbulent financial years, and in order to capture the spreads behaviour, a model has to be able to deal with the complex nature of the financial indicators used to predict the spreads. Fitting a model, using principal components regression of both main and first order interaction terms, for all the parameters of the assumed distribution of the response variable seems to produce promising results.

Item Type: Article
Uncontrolled Keywords: principal components; principal components regression; government bonds; financial indicators; response variable; yield spreads; first order; bond yield; Generalized Additive Model for Location, Scale and Shape (GAMLSS)
Subjects: 300 Social sciences > 330 Economics
500 Natural Sciences and Mathematics > 510 Mathematics
Department: School of Computing and Digital Media
Depositing User: Dimitrios Stasinopoulos
Date Deposited: 22 Jul 2021 08:28
Last Modified: 11 Mar 2022 12:16


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