Forecasting through the Rearview Mirror: Data Revisions and Bond Return Predictability

Ghysels, E, Horan, C and Moench, E (2018) Forecasting through the Rearview Mirror: Data Revisions and Bond Return Predictability. Review of Financial Studies, 31 (2). pp. 678-714. ISSN 0893-9454

Abstract

A previous literature has documented that bond returns are predicted by macroeconomic information not contained in yields contemporaneously. That literature has mostly relied on final revised, rather than real time macroeconomic data. We show that the use of real time data substantially reduces the predictive power of macro variables for future bond returns as well as the implied countercyclicality of term premiums. We discuss potential interpretations of our results.