Some visitors might know that I run a parallel blog at (The) Boring Investor’s Statistics that shows some of the investment figures which i monitor on a regular basis. Among these statistics is a forecast of the rates of interest of the Singapore Savings Bonds (SSBs) to be announced in the upcoming month.
The rates of interest for the SSB to be announced in the next month is dependant on the average yield (i.e. interest rates) of the Singapore Government Securities (SGS) benchmark bonds in today’s month. There is, however, a small issue. Applications for SSBs close on the 4th last working day of the month. For my (The) Boring Investor’s Statistics blog, I usually blog on weekends only, hence, the forecast is carried and posted even earlier out, on the weekend before the close of application. Which means that the post can sometimes be as many as 8 business days from the finish of the month. The forecast error can be bigger.
As a good example, for Oct, the application form shut on 26 Oct, but my forecast was published last Sun on 23 Oct. Which means that I’ve 3 fewer times of data to handle my forecast. Fig. 1 below shows the forecast errors for both methods. The number above shows that the average mistakes for the end-weighted forecasts are smaller than that of the equal-weighted forecasts for all time periods except for the 10-yr interest levels.
However, on closer inspection, the equal-weighted forecast errors are of higher magnitude and are sometimes postive and sometimes negative, producing a smaller mistake when averaged. When compared using standard deviation, which considers only the total value of the mistakes, the end-weighted forecasts have smaller variance than the equal-weighted forecasts for all right time intervals. Thus, end-weighted forecasts provide better estimates of the SSB interest levels. Fig. 2 below shows the forecast SSB interest rates superimposed on the SGS produces for the prior month. When SGS yields are relatively constant for the month, both forecasts yield positive results. However, when SGS produces are either dropping or increasing, the errors become larger.
The equal-weighted forecasts have bigger errors than the end-weighted forecasts because they don’t take into consideration the path of the SGS yields. End-weighted forecasts are more accurate as they provide more excess weight to the SGS yields close to the end of the month as referred to above. Finally, the most effective lessons that I learned from forecasting SSB rates of interest over the past 12 months is this: the near future cannot be predicted.
Although I could enhance my forecast technique as well as perhaps provide good estimations of SSB interest rates, the best I possibly could forecast is 1 month in advance. Month I cannot forecast the SSB rates of interest beyond 1. When the first tranche of SSB was announced in Sep 2015 with a 10-year interest rate of 2.63%, I forecasted that another tranche of SSB would have a higher interest and didn’t make an application for it. When the second tranche was announced with a 10-yr interest rate of 2.78%, I used to be proven right!
- 5% (31 December 2016 est.)
- Short gamma
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- 27-07-2019, 11:47 AM #182
- Isoquant for two inputs that are used in set proportion
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At that point, there is even an outcry among the SSB traders who had applied for the first tranche as their SSBs were now less valuable. Little did I expect that the SSB interest rates for all following tranches would drop below that of the first tranche! The 10-12 months interest rate for the current tranche is 1.79%, which is a lot lower than the two 2.63% for the first tranche. Investors who bought in to the first tranche of SSBs got a good deal in the end.
Smart alecs like me can only just watch the SSB interest rates going lower. If you’re thinking about forecasts of the SSB interest rates, you can refer to SSB INTEREST Estimates within my (The) Boring Investor’s Statistics blog. Just bear in mind the lesson I above learnt, which is that the near future cannot be forecasted.
The Rectors keep properties for at least five to a decade. Jason will sell if he will get a buyer prepared to pay more than market value or if he can profit from home-price gratitude to buy a more substantial property with more units. “My approach to real estate investing isn’t get-rich-quick,” he says.
Jason, who still works 52 hours a week as a firefighter and lately launched a structure company, used to control and maintain the properties himself, and he says he never evicted a tenant. Now he employs 20 people as well as his two brothers and his mother. “I get to do the fun stuff, concentrating on acquisitions and starting new businesses,” he says. “I’ve found that to be successful, you must have a why, and the bigger the why, the more successful you will be,” says Jason.