Complete subset averaging methods in corporate bond return prediction

Tingting Cheng, Shan Jiang, Albert Bo Zhao and Zhimin Jia

Finance Research Letters, 2023, vol. 54, issue C

Abstract: We investigate the performances of two methods of complete subset averaging—complete subset linear averaging (CSLA) and complete subset quantile averaging (CSQA)—on the problem of corporate bond return prediction. We find that the two methods are overwhelmingly better than univariate linear regression and simple forecast combination. Meanwhile, CSQA is better than CSLA in most cases. For practical implementation, we also provide discussions on the selection of the hyperparameter k when applying these complete subset averaging methods.

Keywords: Corporate bond return; Out-of-sample performance; Complete subset regression; Complete subset quantile averaging (search for similar items in EconPapers)
JEL-codes: C53 C58 G12 G17 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:54:y:2023:i:c:s1544612323001010

DOI: 10.1016/j.frl.2023.103727

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