We find that augmenting a regression of excess bond returns on the term structure of forward rates with a rolling estimate of the mean realized jump size—identified from high-frequency bond returns using the bi-power variation technique—substantially increases the R2 of the regression. This result is consistent with the setting of an unspanned risk factor in which the conditional distribution o...

In this paper, we undertake an extensive analysis of in-sample and out-of-sample tests of stock return predictability in an effort to better understand the nature of the empirical evidence on return predictability. We show that a number of financial variables appearing in the literature display both insample and out-of-sample predictive ability with respect to stock returns in annual data cover...