Essays on the term structure of interest rates

This PhD thesis contains three main chapters on macro finance, with a focus on the term structure of interest rates and the applications of state-of-the-art Bayesian econometrics. Except for Chapter 1 and Chapter 5, which set out the general introduction and conclusion, each of the chapters can be considered as a standalone piece of work. In Chapter 2, we model and predict the term structure of US interest rates in a data rich environment. We allow the model dimension and parameters to change over time, accounting for model uncertainty and sudden structural changes. The proposed timevarying parameter Nelson-Siegel Dynamic Model Averaging (DMA) predicts yields better than standard benchmarks. DMA performs better since it incorporates more macro-finance information during recessions. The proposed method allows us to estimate plausible realtime term premia, whose countercyclicality weakened during the financial crisis. Chapter 3 investigates global term structure dynamics using a Bayesian hierarchical factor model augmented with macroeconomic fundamentals. More than half of the variation in the bond yields of seven advanced economies is due to global co-movement. Our results suggest that global inflation is the most important factor among global macro fundamentals. Non-fundamental factors are essential in driving global co-movements, and are closely related to sentiment and economic uncertainty. Lastly, we analyze asymmetric spillovers in global bond markets connected to diverging monetary policies. Chapter 4 proposes a no-arbitrage framework of term structure modeling with learning and model uncertainty. The representative agent considers parameter instability, as well as the uncertainty in learning speed and model restrictions. The empirical evidence shows that apart from observational variance, parameter instability is the dominant source of predictive variance when compared with uncertainty in learning speed or model restrictions. When accounting for ambiguity aversion, the out-of-sample predictability of excess returns implied by the learning model can be translated into significant and consistent economic gains over the Expectations Hypothesis benchmark.

Essays on the term structure of interest rates

This PhD thesis contains three main chapters on macro finance, with a focus on the term structure of interest rates and the applications of state-of-the-art Bayesian econometrics. Except for Chapter 1 and Chapter 5, which set out the general introduction and conclusion, each of the chapters can be considered as a standalone piece of work. In Chapter 2, we model and predict the term structure of US interest rates in a data rich environment. We allow the model dimension and parameters to change over time, accounting for model uncertainty and sudden structural changes. The proposed time-varying parameter Nelson-Siegel Dynamic Model Averaging (DMA) predicts yields better than standard benchmarks. DMA performs better since it incorporates more macro-finance information during recessions. The proposed method allows us to estimate plausible real-time term premia, whose countercyclicality weakened during the financial crisis. Chapter 3 investigates global term structure dynamics using a Bayesian hierarchical factor model augmented with macroeconomic fundamentals. More than half of the variation in the bond yields of seven advanced economies is due to global co-movement. Our results suggest that global inflation is the most important factor among global macro fundamentals. Non-fundamental factors are essential in driving global co-movements, and are closely related to sentiment and economic uncertainty. Lastly, we analyze asymmetric spillovers in global bond markets connected to diverging monetary policies. Chapter 4 proposes a no-arbitrage framework of term structure modeling with learning and model uncertainty. The representative agent considers parameter instability, as well as the uncertainty in learning speed and model restrictions. The empirical evidence shows that apart from observational variance, parameter instability is the dominant source of predictive variance when compared with uncertainty in learning speed or model restrictions. When accounting for ambiguity aversion, the out-of-sample predictability of excess returns implied by the learning model can be translated into significant and consistent economic gains over the Expectations Hypothesis benchmark.

The difference of Being in the early modern world: a relational-material approach to life in Scotland in the period of the witch trials

This thesis investigates how ways of being in different ontologies emerge from material and embodied practice. This general concern is explored through the particular case study of Scotland in the period of the witch trials (the 16th and 17th centuries C.E.). The field of early modern Scottish witchcraft studies has been active and dynamic over the past 15 years but its prioritisation of what people said over what they did leaves a clear gap for a situated and relational approach focusing upon materiality. Such an approach requires a move away from the Cartesian dichotomies of modern ontology to recognise past beliefs as real to those who experienced them, coconstitutive of embodiment and of the material worlds people inhabited. In theory, method and practice, this demands a different way of exploring past worlds to avoid flattening strange data. To this end, the study incorporates narratives and ‘disruptions’ – unique engagements with Contemporary Art which facilitate understanding by enabling the temporary suspension of disbelief. The methodology is iterative, tacking between material and written sources in order to better understand the heterogeneous assemblages of early modern (counter-) witchcraft. Previously separate areas of discourse are (re-)constituted into alternative ontic categories of newly-parallel materials. New interpretations of things, places, bodies and personhoods emerge, raising questions about early modern experiences of the world. Three thematic chapters explore different sets of collaborative agencies as they entwine into new things, co-fabricating a very different world. Moving between witch trial accounts, healing wells, infant burial grounds, animals, discipline artefacts and charms, the boundaries of all prove highly permeable. People, cloth and place bleed into one another through contact; trees and water emerge as powerful agents of magical-place-making; and people and animals meet to become single, hybrid-persons spread over two bodies. Life and death consistently emerge as protracted processes with the capacity to overlap and occur simultaneously in problematic ways. The research presented in this thesis establishes a new way of looking at the nature of Being as experienced by early modern Scots. This provides a foundation for further studies, which can draw in other materials not explored here such as communion wares and metal charms. Comparison with other early modern Western societies may also prove fruitful. Furthermore, the methodology may be suitable for application to other interdisciplinary projects incorporating historical and material evidence.