Profitable opportunities around macroeconomic announcements in the U.S. Treasury market

This thesis studies the impact of macroeconomic announcements on the U.S. Treasury market and investigates profitable opportunities around macroeconomic announcements using data from the eSpeed electronic trading platform. We investigate how macroeconomic announcements affect the return predictability of trade imbalance for the 2-year, 5-year, IO-year U.S. Treasury notes and 30-year U.S. Treasury bonds. The goal of this thesis is to develop a methodology to identify informed trades and estimate the trade imbalance based on informed trades. We use the daily order book slope as a proxy for dispersion of beliefs among investors. Regression results in this thesis indicate that, on announcement days with a high dispersion of beliefs, daily trade imbalance estimated by informed trades significantly predicts returns on the following day. In addition, we develop a trade-imbalance based trading strategy conditional on dispersion of beliefs, informed trades, and announcement days. The trading strategy yields significantly positive net returns for the 2-year T-notes.

Forecasting the Yield Curve of Government Bonds: A Comparative Study

For the past 20 years, researchers have applied the Kalman filter to the modeling and forecasting the term structure of interest rates. Despite its impressive performance in in-sample fitting yield curves, little research has focused on the out-of-sample forecast of yield curves using the Kalman filter. The goal of this thesis is to develop a unified dynamic model based on Diebold and Li (2006) and Nelson and Siegel’s (1987) three-factor model, and estimate this dynamic model using the Kalman filter. We compare both in-sample and out-of-sample performance of our dynamic methods with various other models in the literature. We find that our dynamic model dominates existing models in medium- and long-horizon yield curve predictions. However, the dynamic model should be used with caution when forecasting short maturity yields

Maid of the Mist, Niagara, U.S.A.

The description of the image is "(6) Majestically Grand - the Falls from the 'Maid of the Mist,' Niagara, U.S.A.". The reverse of the image reads "You are on the deck of the small but sturdy little steamer that runs along near the foot of the falls. At this moment you are pretty nearly mid-stream, looking south. The American shore are up over your left shoulder. That tall, dark cliff at the extreme left of what you see is Goat Island. The people up there outlined against the sky look like dolls and no wonder; they are more than 160 feet above your head. Some of them are looking off over the unspeakable grandeurs of the Horseshoe Fall there at the right; some are without doubt looking down at the very boat and remarking that the passengers look like dolls. It is an awesome experience to go so near that never-ceasing downpour of waters from the sky. The air is full of the roar and iridescent spray, and it seems as if the boat must be drawn in under the overwhelming floods never to rise again. Yet, curiously enough, the river right around the boat is not so madly excited as you might expect. It seems more like some great creature, dazed, bewildered, stunned by some incredible experience and not yet quite aware of what has happened. (When it gets down into the Whirlpool Rapids, two miles below here, it is dramatically alive to its situation!) The gigantic curve of the cliffs, reaching in up-stream straight ahead, makes a contour line of over 3000 feet before it comes up against the Canadian banks on the west (right). Geologists say that the Falls ages ago must have been at least seven miles farther down the river (behind you) and have gradually won their way back. Even now the curve of the Horseshoe is worn away from two to four feet in a year. No wonder; 12, 000, 000 cubic feet of water (about 375, 000 tons) sweep over the rocks in one minute, and the same the next minute and the next and the next. See Niagara through the Stereoscope, with special maps locating all the landmarks about the Falls.

Horseshoe Falls from Above, U.S.A.

The description reads "(39) Tireless Niagara - Horseshoe Falls from above - U.S.A.". The reverse states "We are standing on the Canadian side of the river, looking S.E. across the enormous curve of the Horseshoe toward the Dufferin Islands on the Canadian side. 'This is close enough. The time will come undoubtedly when no man can reach this point, when the rocks on which we stand will break and crash into the gulf above which they hang. Table Rock one of the best known points about Niagara in the past, used to extend out over the river from the bank just behind us. It was originally very large but great masses, sometimes a hundred feet in length by fifty in width, have broken off at different periods, the last in 1883, until the whole rock is gone. Off to our left is the centre of the Horseshoe. It is easy to see that in that direction the water is going over in a solid mass, thousands of tons each second, to the river 150 feet below. While the amount of water passing over these rocks varies somewhat according to the height of the river. It has been estimated that the average amount is 12,000,000 cubic feet per minute, that is, about 375,000 tons...Since 1842 the whole contour of these falls has been worn away at the rate of about 2 1/10 ft. per year. In the centre of the Horseshoe where the bulk of the water passes, nearly five feet of rock are worn away each year. The falls have receded 100 feet within the memory of the men now living.' From Niagara Through the Stereoscope, with special 'keyed' maps, published by Underwood & Underwood"

View of Falls from Steel Bridge, Niagara, U.S.A.

The description of the image reads "(4)-8972-General view of Falls from new steel bridge - Maid of the Mist at landing - Niagara, U.S.A." The reverse of the image includes the description, "We are standing on the new steel bridge over Niagara River, 190 feet above the water and looking a little west of south, up the river towards Lake Erie. The high cliff at the extreme left, on the American side, is Prospect Point, where a crowd is gathered at this moment to view the Falls that we see just beyond Prospect Point. That dark, tree-covered mass of rock beyond is Goat Island; and just this side of Goat Island we see a bit of its precipice has been cut off separate from the rest by the powerful current of the waters - the smaller portion is Luna Island, and the Luna Falls go pouring down between the two islands. The face of the precipice curves inward beneath the Luna Falls leaving behind the 160 foot sheet of water the unearthly hollow known as the Cave of the Winds. Beyond Goat Island we see the gigantic curve of the Horseshoe Falls, 3,010 feet long and 158 feet high, reaching around through the clouds of spray to the farther Canadian shore. (The boundary line between British and American territory is in mid-stream.) It has been estimated that every minute 375,000 tons of water pour over these Horseshoe Falls, and they are wearing away the cliffs, moving back up the stream at the rate of 2.4 feet per year. It was probably only about a thousand years ago that they took their plunge just about where we stand now. Down there below us, at the wharf is the Maid of the Mist at the American landing taking on passengers who have come down the steep bank by the inclined railway. Its course takes it through those clouds of spray almost to the very foot of both Falls, - waters falling from 167 feet overhead, and water surging at least as many feet deep under the staunch little vessel. See special 'keyed' maps of Niagara pub. by Underwood and Underwood, also the Niagara Book by Mark Twain, W.D. Howells and others."