Sovereign bond return prediction with realized higher moments

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Title: Sovereign bond return prediction with realized higher moments
Authors: Kinateder, HaraldPapavassiliou, Vassilios G.
Permanent link: http://hdl.handle.net/10197/11286
Date: Sep-2019
Online since: 2020-02-25T16:35:40Z
Abstract: This paper analyzes whether realized higher moments are able to predict out-of-sample sovereign bond returns using high-frequency data from the European bond market. We study bond return predictability over tranquil and crisis periods and across core and periphery markets at the index and country level. We provide fresh evidence that realized kurtosis is the dominant predictor of subsequent returns among higher moments and other predictors such as CDS spreads, short-term interest rates and implied stock market volatility. Our findings further underline that sovereign bond return predictability is stronger during crisis periods and more pronounced for bonds of lower credit ratings.
Funding Details: University College Dublin
Type of material: Journal Article
Publisher: Elsevier
Journal: Journal of International Financial Markets, Institutions and Money
Volume: 62
Start page: 53
End page: 73
Copyright (published version): 2019 Elsevier
Keywords: Sovereign bond marketsHigh-frequency dataRealized higher momentsHyper-skewnessHyper-kurtosisOut-of-sample predictionLiquidity riskSkewness preferenceStock returnsVolatility
DOI: 10.1016/j.intfin.2019.05.002
Language: en
Status of Item: Peer reviewed
Appears in Collections:Business Research Collection
UCD RePEc Archive Collection

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