Forecasting Government Bond Risk Premia Using Technical Indicators
Singapore Management University; Singapore Management University - Lee Kong Chian School of Business
Central University of Finance and Economics (CUFE) - School of Finance
Singapore Management University - Lee Kong Chian School of Business
Washington University in St. Louis - Olin School of Business
July 28, 2013
25th Australasian Finance and Banking Conference 2012
Asian Finance Association (AsFA) 2013 Conference
While economic variables have been used extensively to forecast bond risk premia, little attention has been paid to technical indicators which are widely used by practitioners. In this paper, we study the predictive ability of a variety of technical indicators vis-a-vis the economic variables. We ﬁnd that technical indicators have signiﬁcant in both in- and out-of-sample forecasting power. Moreover, we ﬁnd that using information from both technical indicators and economic variables increases the forecasting performance substantially. We also ﬁnd that the economic value of bond risk premia forecasts from our methodology is comparable to that of equity risk premium forecasts.
Number of Pages in PDF File: 50
Keywords: Bond risk premium predictability, Economic variables, Technical analysis, Moving average rules, Volume, Out-of-sample forecasts, Principal components
JEL Classification: C53, C58, G11, G12, G17working papers series
Date posted: August 22, 2011 ; Last revised: November 13, 2013
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