We used four different corporate bond credit spreads as dependent variables: aggregate, AAA 10-year, Moody's AAA Index, and BBB 10-year.

We used all the variables mentioned above, incorporating information from the correlation matrices to find the best multifactor models.

Correlation Matrix for the Variables
• Aggregate Credit Spread
• AAA 10-year Credit Spread
• BBB 10-year Credit Spread

We found a multifactor model for each credit spread that had the best predictive value.

• Aggregate Credit Spread - 7-Factor Model
• AAA 10-year Credit Spread - 5-Factor Model
• BBB 10-year Credit Spread - 7-Factor Model

We then ran the best model from the in-sample periods to forecast the out-of-sample period for each dependent variable. See results.