%0 Journal Article %A George Mylnikov %T Forecasting U.S. Bond Returns:
A Practitioner’s Perspective %D 2014 %R 10.3905/jpm.2014.40.3.124 %J The Journal of Portfolio Management %P 124-136 %V 40 %N 3 %X This article presents a practitioner’s view of the evidence on the predictability of U.S. bond returns, using forward rates found in the academic literature. The author examines this evidence from a dual perspective: statistical and economic. He finds that the regressions of monthly returns of U.S. Treasury futures on the set of three forward rates, with one-, five- and ten-year expirations, are statistically viable. An implementation of these forecasts as an investment strategy shows that it is historically profitable on a risk-adjusted basis. Furthermore, the author demonstrates the importance of the dual approach to assessing predictability, by providing an example of a slightly modified version of the main model that is more intuitive, more parsimonious, and statistically more robust, yet it fails to exhibit better economic performance.TOPICS: Exchanges/markets/clearinghouses, factor-based models, statistical methods %U https://jpm.pm-research.com/content/iijpormgmt/40/3/124.full.pdf