Predicting Bond Betas Using Macro-Finance Variables

13 Pages Posted: 11 Jan 2017 Last revised: 21 Jul 2018

See all articles by Nektarios Aslanidis

Nektarios Aslanidis

Universitat Rovira Virgili

Charlotte Christiansen

Aarhus University - CREATES

Andrea Cipollini

University of Palermo - d/SEAS; Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics; Università degli studi di Modena e Reggio Emilia (UNIMORE) - Center for Research in Banking and Finance (CEFIN)

Date Written: December 7, 2017

Abstract

We predict bond betas conditioning on a number of macro-finance variables. We explore differences across long-term government bonds, investment grade corporate bonds, and high yield corporate bonds. We conduct out-of-sample forecasting using the new approach of combining predictor variables through Complete Subset Regressions (CSR). We consider the robustness of CSR forecasts across the 1-month, 3-month, and 12-month forecasting horizons. The CSR method performs well in predicting bond betas.

Keywords: bond betas; Complete Subset Regressions; corporate bonds; government bonds; macro-finance variables; Model Confidence Set

JEL Classification: C22; C53; C55; G12

Suggested Citation

Aslanidis, Nektarios and Christiansen, Charlotte and Cipollini, Andrea, Predicting Bond Betas Using Macro-Finance Variables (December 7, 2017). Available at SSRN: https://ssrn.com/abstract=2896665 or http://dx.doi.org/10.2139/ssrn.2896665

Nektarios Aslanidis

Universitat Rovira Virgili ( email )

Tarragona
Spain

Charlotte Christiansen (Contact Author)

Aarhus University - CREATES ( email )

Fuglesangs Alle 4
Aarhus V, DK 8210
Denmark

Andrea Cipollini

University of Palermo - d/SEAS ( email )

Viale delle Scienze, edificio 13
Palermo, 90124
Italy

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics ( email )

Viale Berengario 51
41100 Modena, Modena 41100
Italy

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Center for Research in Banking and Finance (CEFIN) ( email )

via Berengario 51
Modena, modena I-41100
Italy

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