1 May 1994Financial Analysts JournalVolume 50, Issue 3
Using Yield Curve Shapes to Manage Bond Portfolios
Multiple discriminant analysis can be used to extract and utilize the information contained in the shape of the yield curve. Using this information, combined with economic variables such as the unemployment and inflation rates, the MDA model classified months in the 1966 - 87 period as either "bear" or "bull" months. A portfolio based on the model's predictions turned in a performance superior to that of a buy-and-hold strategy. This suggests that MDA can enhance the returns of investment portfolios.
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Financial Analysts Journal
CFA Institute Member ContentPublisher Information
Association for Investment Management and Research
4 pages doi.org/10.2469/faj.v50.n3.57ISSN/ISBN: 0015-198X
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