Factor Decomposition and Diversification in European Corporate Bond Markets

33 Pages Posted: 25 Aug 2010 Last revised: 12 Sep 2011

See all articles by Ronald Mahieu

Ronald Mahieu

Tilburg University - Center for Economic Research, Econometrics and Finance Group; TiasNimbas Business School

Mary Pieterse-Bloem

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Erasmus Research Institute of Management (ERIM)

Date Written: August 8, 2011

Abstract

In this paper we present an analysis of diversification strategies on portfolios of European corporate bonds. From the perspective of a U.S.-based investor we study whether mean-variance diversification strategies change as a result of the introduction of the European Economic and Monetary Union (EMU). Using a comprehensive and unique data set of European corporate bonds we show that country factors are more important than industry factors to describe the cross-section of European corporate bonds. In particular we find that in the Post-EMU period country factors remain important.

Suggested Citation

Mahieu, Ronald J. and Pieterse-Bloem, Mary, Factor Decomposition and Diversification in European Corporate Bond Markets (August 8, 2011). Available at SSRN: https://ssrn.com/abstract=1665122 or http://dx.doi.org/10.2139/ssrn.1665122

Ronald J. Mahieu

Tilburg University - Center for Economic Research, Econometrics and Finance Group ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2430 (Phone)
+31 13 466 3280 (Fax)

HOME PAGE: http://center.uvt.nl/staff/mahieu/

TiasNimbas Business School ( email )

Warandelaan 2
Tilburg, North-Brabant 5071HS
Netherlands

Mary Pieterse-Bloem (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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