Forecasting Bond Risk Premia Using Technical Analysis

• Main Authors: GOH, Choo Yong, Jeremy, Jiang, Fuwei, TU, Jun, Zhou, Guofu
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2011
• Subjects: Bond risk premium predictability; Macroeconomic variables; Moving-average rules; Volume; Out-of-sample forecasts; Principal components; Corporate Finance
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/3144; https://ink.library.smu.edu.sg/context/lkcsb_research/article/4143/viewcontent/Bond_tech_11_30_2011.pdf
• Institution: Singapore Management University

While economic variables have been used extensively to forecast the U.S. bond risk premia, little attention has been paid to the use of technical indicators which are widely employed by practitioners. In this paper, we fill this gap by studying the predictive ability of using a variety of technical indicators vis-a-vis the economic variables. We find that the technical indicators have statistically and economically significant in- and out-of-sample forecasting power. Moreover, we find that utilizing information from both technical indicators and economic variables substantially increases the forecasting performances relative to using just economic variables.