Out-of-Sample Predictions of Bond Excess Returns and Forward Rates: An Asset Allocation Perspective

By Daniel L. Thornton, Giorgio Valente. 2010

149 citations recorded by the source corpus.

This article investigates the out-of-sample predictability of bond excess returns. We assess the economic value of the forecasting ability of empirical models based on long-term forward interest rates in a dynamic asset allocation strategy. The results show that the information content of forward rates does not generate systematic economic value to investors. Indeed, these models do not outperform the no-predictability benchmark. Furthermore, their relative performance deteriorates over time. The Author 2012. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.

Subfields: Finance

View Paper: https://www.semanticscholar.org/paper/8b41aee22d72c7e613d3eafc89962c437adc6bf2

Citations in the corpus

• Expected Returns in Treasury Bonds (2015, unknown): “In this context, we confirm the findings of Thornton and Valente (2012) that the forward rate factor works poorly out-of-sample, underperforming the term spread.”