Reconstructing the Yield Curve
The constant-maturity zero-coupon Treasury yield curve is one of the most studied datasets. We reconstruct the yield curve using a non-parametric kernel-smoothing method with a novel adaptive bandwidth specifically designed to fit the Treasury yield curve. Our curve is globally smooth while still capturing important local variation. Economically, we show that applying our data leads to different conclusions from using the leading alternative data of Gürkaynak et al. (2007) (GSW) when we repeat two popular studies of Cochrane and Piazzesi (2005) and Giglio and Kelly (2018). Statistically, we show our dataset preserves information in the raw data and has much smaller pricing errors than GSW. Our new yield curve is maintained and updated online, complemented by bandwidths that summarize information content in the raw data.
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Copy CitationYan Liu and Jing Cynthia Wu, "Reconstructing the Yield Curve," NBER Working Paper 27266 (2020), https://doi.org/10.3386/w27266.Download Citation
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Published Versions
Yan Liu & Jing Cynthia Wu, 2021. "Reconstructing the yield curve," Journal of Financial Economics, vol 142(3), pages 1395-1425. citation courtesy of 
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