Momentum in Corporate Bond Returns

63 Pages Posted: 2 Aug 2010 Last revised: 8 Jan 2013

See all articles by Gergana Jostova

Gergana Jostova

George Washington University - Department of Finance

Stanislava Nikolova

University of Nebraska - Lincoln

Alexander Philipov

George Mason University - Department of Finance

Christof W. Stahel

Independent

Multiple version iconThere are 2 versions of this paper

Date Written: December 12, 2012

Abstract

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.

Keywords: momentum, credit risk, corporate bonds, TRACE, anomalies, market efficiency

JEL Classification: G14, G12

Suggested Citation

Jostova, Gergana and Nikolova, Stanislava and Philipov, Alexander and Stahel, Christof W., Momentum in Corporate Bond Returns (December 12, 2012). Available at SSRN: https://ssrn.com/abstract=1651853 or http://dx.doi.org/10.2139/ssrn.1651853

Gergana Jostova (Contact Author)

George Washington University - Department of Finance ( email )

2201 G St NW
Funger Hall, Suite 501
Washington, DC 20052
United States
202-994-7478 (Phone)

HOME PAGE: http://home.gwu.edu/~jostova

Stanislava Nikolova

University of Nebraska - Lincoln ( email )

Lincoln, NE 68588-0490
United States
402-472-6049 (Phone)

Alexander Philipov

George Mason University - Department of Finance ( email )

Fairfax, VA 22030
United States

HOME PAGE: http://mason.gmu.edu/~aphilipo

Christof W. Stahel

Independent ( email )

No Address Available

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