Common Equity Factors in Corporate Bond Markets

23.10.2017

Asset Pricing, Empirische Kapitalmarktforschung

in Jurczenko, E. (Ed.), Factor Investing: From Traditional to Alternative Risk Premia, 207-226, ISTE Press - Elsevier

Autoren

Bektic, Dr. Demir Neugebauer, Dr. Ulrich Wegener, Dr. Michael Wenzler, Dr. Josef-Stefan

Abstract

Size, value, momentum and beta factors have been extensively studied for equity markets, but their impact on corporate bond markets is much less explored. Since structural models based on contingent claims link credit and equity securities, we study if these factors extend their success in equity markets to U.S. credit markets. While size, value and momentum are economically and statistically significant in the U.S. high yield space we find that only size and momentum have explanatory power for the U.S. investment grade market. Finally, we combine size, value, momentum and beta to construct equal-weighted, investable, long-only, multi-factor portfolios and demonstrate that these portfolios outperform traditional fixed-income benchmarks on a risk-adjusted basis.

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