We analyse the generalized, dynamic Nelson-Siegel approach including five factors to ensures the absence of arbitrage. In contrast to previous empirical analyses we define our risk factors so that they are observable and determine their significance using a series of cross sectional regressions....

We analyse the generalized, dynamic Nelson-Siegel approach including five factors to ensures the absence of arbitrage. In contrast to previous empirical analyses we define our risk factors so that they are observable and determine their significance using a series of cross sectional regressions....

We conduct a simulation analysis of the Fama and MacBeth[1973. Risk, returns and equilibrium: empirical tests. Journal of Political Economy 71, 607¨C636.] two-pass procedure, as well as maximum likelihood (ML) and generalized method of moments estimators of cross-sectional expected return...