Showing posts with label MTSM. Show all posts
Showing posts with label MTSM. Show all posts

The Cochrane-Piazzesi Return Forecasting Factor

The Cochrane and Piazzesi (2005, CP) return-forecasting factor is a single, tent-shaped linear combination of forward rates that predicts excess returns on Treasury bonds across all maturities, with \( R^2 \) values ranging from 35% to 44%.

From CP(2008)