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2022-03-03

Predicting Bond Returns: 70 Years of International Evidence

We use 70 years of international data from the major bond markets to examine bond return predictability through in-sample and out-of-sample tests. Our results reveal economically strong and statistically significant bond return predictability. This finding is robust over markets and time periods, including 30 years of out-of-sample data, prolonged periods of rising or falling rates, and a dataset of nine additional countries. Furthermore, the results are not explained by market or macroeconomic risks, nor can they be easily attributed to transaction costs or other investment frictions. These results reveal predictable dynamics in government bond returns relevant for academics and practitioners.

Author - Guido Baltussen, Martin Martens, Olaf Penninga
Journal - Financial Analysts Journal

Source - https://www.tandfonline.com/doi/full/10.1080/0015198X.2021.1908775