Bridge over ocean
24 May 2021 Financial Analysts Journal Volume 77, Issue 3

Predicting Bond Returns: 70 Years of International Evidence

  1. Guido Baltussen
  2. Martin Martens
  3. Olaf Penninga

This study uses a testing framework based on financial trading strategies on data spanning 70 years in six countries and finds consistent and robust evidence of bond return predictability.

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.

Read the Complete Article in Financial Analysts Journal Financial Analysts Journal CFA Institute Member Content

We’re using cookies, but you can turn them off in Privacy Settings.  Otherwise, you are agreeing to our use of cookies.  Accepting cookies does not mean that we are collecting personal data. Learn more in our Privacy Policy.