Australian Bond Excess Returns: An Asset Allocation Perspective

11 Pages Posted: 7 Jun 2017

See all articles by Rui Chen

Rui Chen

Central University of Finance and Economics (CUFE)

Meng Wang

Central University of Finance and Economics (CUFE)

Jiri Svec

The University of Sydney - Discipline of Finance

Date Written: June 2017

Abstract

We examine the out‐of‐sample predictability of excess returns in the Australian government bond market. Our results confirm previous findings that a linear combination of forward rates provides a statistically significant prediction of bond excess returns on 1‐ to 5‐year maturity bonds. However, from an asset allocation perspective, our predictive model fails to obtain positive economic utility against the no‐predictability benchmark. Our results are robust to the sample period and different parameter assumptions.

Suggested Citation

Chen, Rui and Wang, Meng and Svec, Jiri, Australian Bond Excess Returns: An Asset Allocation Perspective (June 2017). Australian Economic Papers, Vol. 56, Issue 2, pp. 163-173, 2017, Available at SSRN: https://ssrn.com/abstract=2982157 or http://dx.doi.org/10.1111/1467-8454.12087

Rui Chen (Contact Author)

Central University of Finance and Economics (CUFE) ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

Meng Wang

Central University of Finance and Economics (CUFE)

39 South College Road
Haidian District
Beijing, Beijing 100081
China

Jiri Svec

The University of Sydney - Discipline of Finance ( email )

P.O. Box H58
Sydney, NSW 2006
Australia
+61 2 9036 6241 (Phone)

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