This research investigates the macro factors for forecasting (1) bond risk premia and (2) term structure of government … bond yields by using Bayesian Model Averaging (BMA) based on empirical prior. Different from the traditional variable … further improve the other method's forecasting performance. The performance of using BMA to forecast bond excess return is …

returns obtained by a given forecast model. An empirical application based on an optimal mean-variance bond portfolio problem … measures of forecast accuracy. We compute average net excess returns, standard deviation, and the Sharpe ratio of bond …

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 …