Bond return predictability: Evidence from 25 OECD countries

Neluka Devpura, Paresh Kumar Narayan and Susan Sunila Sharma

Journal of International Financial Markets, Institutions and Money, 2021, vol. 75, issue C

Abstract: In this paper, we test for bond excess return predictability in 25 Organisation for Economic Co-operation and Development countries, using a set of 12 predictor variables, including macroeconomic, financial, and commodity-based indicators. The novelty of our approach is that we employ both time-series and panel data models that accommodate key data features, namely, persistency, endogeneity, heteroscedasticity, and cross-sectional dependence. We note two key findings. The first is that commodity variables, both oil spot and futures prices, and the world commodity price index predict bond excess returns. Our second finding confirms that macroeconomic variables (the term spread and T-bill yield) are successful predictors of bond excess returns.

Keywords: Panel predictive regression; Heteroskedasticity; Bond excess returns; Commodities (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:75:y:2021:i:c:s1042443121000202

DOI: 10.1016/j.intfin.2021.101301

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