Australian Bond Excess Returns: An Asset Allocation Perspective
11 Pages Posted: 7 Jun 2017
Date Written: June 2017
Abstract
We examine the out‐of‐sample predictability of excess returns in the Australian government bond market. Our results confirm previous findings that a linear combination of forward rates provides a statistically significant prediction of bond excess returns on 1‐ to 5‐year maturity bonds. However, from an asset allocation perspective, our predictive model fails to obtain positive economic utility against the no‐predictability benchmark. Our results are robust to the sample period and different parameter assumptions.
Suggested Citation: Suggested Citation
Chen, Rui and Wang, Meng and Svec, Jiri, Australian Bond Excess Returns: An Asset Allocation Perspective (June 2017). Australian Economic Papers, Vol. 56, Issue 2, pp. 163-173, 2017, Available at SSRN: https://ssrn.com/abstract=2982157 or http://dx.doi.org/10.1111/1467-8454.12087
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