Asset Pricing With Data Revisions

Borup, Daniel; Schütte, Erik Christian Montes

doi:10.2139/ssrn.3448508

Cited by 3 publications

(2 citation statements)

References 86 publications

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“…The second state variable is the macroeconomic uncertainty index (U) proposed in Jurado et al (2015). 12 Macroeconomic uncertainty has recently been identified as an important contributor to business cycle fluctuations (Bloom, 2009, Ludvigson, Ma, andNg, 2019) and asset prices (Drechsler, 2013, Bali, Brown, and Tang, 2017, Borup and Schütte, 2020. Moreover, it has recently been used to study state-dependent performance of affine term structure models (Sarno et al, 2016).…”

Section: State Variablesmentioning

confidence: 99%

Predicting Bond Return Predictability

Borup¹,

Eriksen²,

Kjær³

et al. 2024

Management Science

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This paper provides empirical evidence on predictable time variations in out-of-sample bond return predictability. Bond return predictability is associated with periods of high (low) economic activity (uncertainty), which implies that violations of the expectations hypothesis are state dependent and linked to features of the business cycle. These state dependencies in predictability, established by introducing a new multivariate test for equal conditional predictive ability, can be used in real time to improve out-of-sample bond risk premia estimates and investors’ economic utility through a novel dynamic forecast combination scheme that uses predicted forecasting performance to identify the best set of methods to include in the combined forecast. Dynamically combined forecasts exhibit strong countercyclical behavior and peak during recessions. This paper was accepted by Lukas Schmid, finance. Funding: This work was supported by the Danish Council of Independent Research [Grants DFF 7024–00020B and DFF 9033–00003B] and the Danish Finance Institute. Supplemental Material: The data files and online appendices are available at https://doi.org/10.1287/mnsc.2023.4713 .

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Section: State Variablesmentioning

confidence: 99%

Predicting Bond Return Predictability

Borup¹,

Eriksen²,

Kjær³

et al. 2024

Management Science

View full text Add to dashboard Cite

show abstract

Section: State Variablesmentioning

confidence: 99%

Predicting Bond Return Predictability

et al. 2020

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and participants at the Econometrics Workshop at University of Pennsylvania (2017) and research seminars at Aarhus University (2019) for many constructive comments and suggestions. Jonas N. Eriksen and Martin Thyrsgaard acknowledge support from the Danish Council of Independent Research (DFF 7024-00020B and DFF 9033-00003B). Part of this paper was previously circulated under the title "Statistical tests for equal predictive ability across multiple forecasting methods".

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Rediscovering the CCAPM Lost in Data Revisions

Guo

Pai²

2019

SSRN Journal

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Asset Pricing With Data Revisions

Cited by 3 publications

References 86 publications

Predicting Bond Return Predictability

Predicting Bond Return Predictability

Predicting Bond Return Predictability

Rediscovering the CCAPM Lost in Data Revisions

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