International Corporate Bond Returns: Uncovering Predictability Using Machine Learning

45 Pages Posted: 27 Jun 2022 Last revised: 17 Sep 2023

See all articles by Delong Li

Delong Li

University of Guelph - Gordon S. Lang School of Business and Economics

Lei Lu

University of Manitoba

Zhen Qi

University of Manitoba - Asper School of Business

Guofu Zhou

Washington University in St. Louis - John M. Olin Business School

Date Written: June 19, 2022

Abstract

In this paper, we apply machine learning techniques to predict corporate bond returns all over the world. With a novel dataset, we find there is strong predictability of corporate bond returns in international markets. However, the documented factors that drive bonds in the U.S. market are substantially different from factors that impact bonds in non-U.S. markets, where downside risk and illiquidity are more influential. We further find there are cross-country differences in the degree of bond cross-country integration and bond-stock integration, but these two integrations in developed markets are on average higher than in emerging markets.

Keywords: corporate bonds; international asset pricing; machine learning; return predictability

JEL Classification: C52;G10; G11; G15

Suggested Citation

Li, Delong and Lu, Lei and Qi, Zhen and Zhou, Guofu, International Corporate Bond Returns: Uncovering Predictability Using Machine Learning (June 19, 2022). Available at SSRN: https://ssrn.com/abstract=4140701 or http://dx.doi.org/10.2139/ssrn.4140701

Delong Li

University of Guelph - Gordon S. Lang School of Business and Economics ( email )

Guelph, ON, Canada
Guelph

Lei Lu

University of Manitoba ( email )

Zhen Qi

University of Manitoba - Asper School of Business ( email )

181 Freedman Crescent
Winnipeg, Manitoba R3T 5V4
Canada

Guofu Zhou (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

Washington University
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-6384 (Phone)
314-658-6359 (Fax)

HOME PAGE: http://apps.olin.wustl.edu/faculty/zhou/

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