Predicting Returns in US Treasuries: Do Tents Matter?

International Journal of Theoretical and Applied Finance, Vol. 21, No. 07 We look at the economic significance and at the robustness of the new-generation, tent-shaped return-predicting factors in US Treasuries. We find that, in itself, the precise tent shape is neither robust nor important for predictability. However, we explain why the high nu...
Author(s)
Riccardo Rebonato

International Journal of Theoretical and Applied Finance, Vol. 21, No. 07

We look at the economic significance and at the robustness of the new-generation, tent-shaped return-predicting factors in US Treasuries. We find that, in itself, the precise tent shape is neither robust nor important for predictability. However, we explain why the high number of regressors needed to build a tent factor are required for high predictability, and we provide an economic interpretation for the finding.

Keywords: Risk premia, asset pricing, bond pricing

See more