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

Thornton, DL and Valente, G (2012) 'Out-of-Sample Predictions of Bond Excess Returns and Forward Rates: An Asset Allocation Perspective.' Review of Financial Studies, 25 (10). pp. 3141-3168. ISSN 0893-9454

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Abstract

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.

Item Type: Article
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Essex Business School
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 30 Aug 2013 15:01
Last Modified: 06 Jan 2022 13:37
URI: http://repository.essex.ac.uk/id/eprint/5312

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