Momentum in Corporate Bond Returns
George Washington University - Department of Finance
Stanislava (Stas) Nikolova
Securities and Exchange Commission (SEC)
George Mason University - Finance Area
Christof W. Stahel
US Securities & Exchange Commission - Division of Risk, Strategy and Financial Innovation
December 12, 2012
This paper documents significant momentum in a comprehensive sample of 81,491 US corporate bonds with both transaction and dealer-quote data from 1973 to 2011. Momentum is driven by non-investment grade (NIG) bonds. Momentum profits have increased over time along with the growth of this segment. From 1991 to 2011, they average 59 basis points (bps) per month across all bonds and 192 bps in NIG bonds. NIG bonds issued by private firms earn even higher profits (282 bps). Momentum profits do not appear to compensate for risk or persist as a result of trading frictions. Bond momentum is not just a manifestation of equity momentum.
Number of Pages in PDF File: 63
Keywords: momentum, credit risk, corporate bonds, TRACE, anomalies, market efficiency
JEL Classification: G14, G12working papers series
Date posted: August 2, 2010 ; Last revised: January 8, 2013
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