The part of credit spread that is not explained by corporate credit risk forecasts future economic activity. I show that the link with aggregate business risk and bond liquidity risk explains this fi nding. Once I project spreads on these two risk factors, which are readily measurable with the...

We document strong evidence of cross-sectional predictability of corporate bond returns based on a set of yield predictors that capture the information in the yields of past 1, 3, 6, 12, 24, 36 and 48 months. Return predictability is economically and statistically significant, and is robust to...

This paper investigates the monthly out-of-sample predictability of corporate bond yield using BVAL curve values for the period April 2011 to June 2020 for three tickers of JPM, GS and IBM and a rolling time window. Multiple univariate and multivariate models using statistical and machine...

We derive an analytic relation between equity risk premium and the term structure of variance risk premium (VRP). Motivated by this result, we estimate the VRP term structure using a general and fully analytical discrete-time option pricing framework featuring multiple volatility components and...

A growing body of literature confirms the significance of the commodity futures basis factor: It has a significantly positive premium and it explains the cross-section of commodity-futures excess returns. We extend the literature by documenting predictive relation between this factor and the...

The evolution of the yields of different maturities is related and can be described by a reduced number of commom latent factors. Multifactor interest rate models of the finance literature, common factor models of the time series literature and others use this property. Each model has advantages...

This paper examines the properties of the variance risk premium (VRP). We propose a flexible asset pricing model that captures co-jumps in prices and volatility, and self-exciting jump clustering. We estimate the model on equity returns and variance swap rates at different horizons. The total...

This paper investigates whether ETF returns lead the returns of underlying bonds and similar style bond funds. Bond prices are often stale due to their lack of liquidity, and price discovery may occur in ETFs and then in underlying bonds. As predicted, we find that ETF returns predict its own...

The question of predictability of credit spreads is of more than just academic interest. The ability to generate unerring spread forecasts is of considerable practical relevance for both treasurers of companies, who want to finance themselves through bonds, and institutional investors, who must...

We consider whether government bonds, through the term structure, or corporate bonds, through the default yield, provide predictive power for output, consumption and investment growth. Such predictive power will allow policy-makers to use the information as a leading indicator for macroeconomic...