Bond Return Predictability: Economic Value and Links to the Macroeconomy

• 成果类型: Article
• 署名作者: Gargano, Antonio; Pettenuzzo, Davide; Timmermann, Allan
• 署名单位: University of Melbourne; Brandeis University; University of California System; University of California San Diego
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2017.2829
• 发表日期: 2019
• 页码: 508-540
• 关键词: Bond returns; yield curve; macro factors; stochastic volatility; Time-varying parameters; unspanned macro risk factors

摘要

Studies of bond return predictability find a puzzling disparity between strong statistical evidence of return predictability and the failure to convert return forecasts into economic gains. We show that resolving this puzzle requires accounting for important features of bond return models such as volatility dynamics and unspanned macro factors. A three-factor model comprising a forward spread, a weighted combination of forward rates, and a macro factor generates notable gains in out-of-sample forecast accuracy compared with a model based on the expectations hypothesis. Such gains in predictive accuracy translate into higher risk-adjusted portfolio returns after accounting for estimation error and model uncertainty. Consistent with models featuring unspanned macro factors, our forecasts of future bond excess returns are strongly negatively correlated with survey forecasts of short rates.