Expected Business Conditions and Bond Risk Premia

Jonas Nygaard Eriksen

doi:10.1017/S0022109017000369

Expected Business Conditions and Bond Risk Premia

Publikation: Bidrag til tidsskrift/Konferencebidrag i tidsskrift /Bidrag til avis › Tidsskriftartikel › Forskning › peer review

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Abstract

In this article, I study the predictability of bond risk premia by means of expectations to future business conditions using survey forecasts from the Survey of Professional Forecasters. I show that expected business conditions consistently affect excess bond returns and that the inclusion of expected business conditions in standard predictive regressions improve forecast performance relative to models using information derived from the current term structure or macroeconomic variables. The results are confirmed in a real-time out-of-sample exercise, where the predictive accuracy of the models is evaluated both statistically and from the perspective of a mean-variance investor that trades in the bond market.

Originalsprog	Engelsk
Tidsskrift	Journal of Financial and Quantitative Analysis
Vol/bind	52
Nummer	4
Sider (fra-til)	1667-1703
Antal sider	37
ISSN	0022-1090
DOI	https://doi.org/10.1017/S0022109017000369
Status	Udgivet - 2017

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10.1017/S0022109017000369

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Expected Business Conditions and Bond Risk Premia

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