Time-varying pricing of risk in sovereign bond futures returns

Abstract

We examine time-varying pricing of risk in bond futures excess returns. We provide evidence that the predictability is significantly dynamic and increases during crisis period. We detect realized volatility and realized kurtosis to carry valuable information for returns on the U.S. market which is not priced in traditional predictors. Whereas the realized volatility reveals to have negative effect on next-day excess returns, effect of realized kurtosis is switching from positive effect in crisis to negative values in calm periods.