Gains from Active Bond Portfolio Management Strategies

Posted: 21 May 2019

See all articles by Naomi E. Boyd

Naomi E. Boyd

West Virginia University

Jeffrey M. Mercer

Texas Tech University - Department of Finance

Date Written: February 13, 2010

Abstract

The belief that excess returns can be achieved by correctly timing changes in yields and/or yield spreads motivates active bond portfolio management strategies. Given the rich literature linking yield spread patterns to both the business cycle and changes in short-term interest rates, we motivate and demonstrate the efficacy of simple spread-trading strategies tied to both. Using thirty-four years of fixed income returns, we demonstrate that straightforward rules would have led to superior risk-adjusted performance relative to standard fixed-income benchmarks. Furthermore, the strategies tied to short-maturity interest rates are based on the use of past information only.

Keywords: Fixed income, Monetary policy, Business cycle, Asset allocation

JEL Classification: G11, E44, E43

Suggested Citation

Boyd, Naomi E. and Mercer, Jeffrey M., Gains from Active Bond Portfolio Management Strategies (February 13, 2010). Journal of Fixed Income, Vol. 19, No. 4, 2010, https://doi.org/10.3905/JFI.2010.19.4.073, Available at SSRN: https://ssrn.com/abstract=1676371

Naomi E. Boyd (Contact Author)

West Virginia University ( email )

PO Box 6025
Morgantown, WV 26506
United States

Jeffrey M. Mercer

Texas Tech University - Department of Finance ( email )

Rawls College of Business Administration
Lubbock, TX 79409
United States
806-742-3365 (Phone)
806-742-3197 (Fax)

HOME PAGE: http://jmercer.ba.ttu.edu/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
4,557
PlumX Metrics