Berardi, Andrea; Markovich, Michael; Plazzi, Alberto; … - 2019 - This version: August 29, 2019
we label Convergence Gap (CG), contains information that is valuable for bond predictability. Adding CG in forecasting … regressions of bond excess returns significantly raises the R-squared, and restores countercyclical variation in bond risk premia … the path of rates, our factor has predictive ability for real bond excess returns. The importance of the gap remains …
