Download This PaperMomentum in Corporate Bond Returns
63 Pages Posted: 2 Aug 2010 Last revised: 8 Jan 2013
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Momentum in Corporate Bond Returns
Momentum in Corporate Bond Returns
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: Suggested Citation
Alexander Philipov
George Mason University - Department of Finance ( email )
Fairfax, VA 22030
United States
HOME PAGE: http://mason.gmu.edu/~aphilipo
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