RT Journal Article
SR Electronic
T1 Forecasting U.S. Bond Returns:<br/>
               <em>A Practitioner’s Perspective</em>
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 124
OP 136
DO 10.3905/jpm.2014.40.3.124
VO 40
IS 3
A1 George Mylnikov
YR 2014
UL https://pm-research.com/content/40/3/124.abstract
AB This article presents a practitioner’s view of the evidence on the predictability of U.S. bond returns, using forward rates found in the academic literature. The author examines this evidence from a dual perspective: statistical and economic. He finds that the regressions of monthly returns of U.S. Treasury futures on the set of three forward rates, with one-, five- and ten-year expirations, are statistically viable. An implementation of these forecasts as an investment strategy shows that it is historically profitable on a risk-adjusted basis. Furthermore, the author demonstrates the importance of the dual approach to assessing predictability, by providing an example of a slightly modified version of the main model that is more intuitive, more parsimonious, and statistically more robust, yet it fails to exhibit better economic performance.TOPICS: Exchanges/markets/clearinghouses, factor-based models, statistical methods