This paper addresses the out-of-sample prediction of European Monetary Union yield spread changes. We extend the Longstaff and Schwartz (1995) approach by using liquidity variables, namely funding liquidity as measured by European Central Bank's unconventional monetary policy as well as a...

This paper analyzes whether realized higher moments are able to predict out-of-sample sovereign bond returns using high-frequency data from the European bond market. We study bond return predictability over tranquil and crisis periods and across core and periphery markets at the index and...