pub139606 Article

fiu authors

abstract

  • Principal component analysis and factor analysis of term structure movements shows that between 80 and 90% of term structure shifts can be explained by a uniform shift that is roughly parallel. In contrast, our analysis of term structure data from 1986 to 2016 reveals that only 57% of the shifts have been uniform. Twist- and butterfly-type shifts accounted for 28 and 10%, respectively, of all shifts. Remarkably, these frequency results are roughly the same for uniform and twist shifts determined on a daily, weekly, and monthly basis over the entire sample and over three subperiods. Based on historical data, an investor should expect a uniform shift in the term structure about 57% and a twist 28% of the time.

Digital Object Identifier (DOI)

start page

  • 360

issue

  • 2