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Factor Investing in the Corporate Bond Market

49 Pages Posted: 31 Oct 2014 Last revised: 13 Feb 2017

Patrick Houweling

Robeco Investment Research

Jeroen van Zundert

Robeco Asset Management

Date Written: September 26, 2016


We offer empirical evidence that size, low-risk, value, and momentum factor portfolios generate economically meaningful and statistically significant alphas in the corporate bond market. Because the correlations between the single-factor portfolios are low, a combined multi-factor portfolio benefits from diversification among the factors: It has a lower tracking error and a higher information ratio than the individual factors. Our results are robust to transaction costs, alternative factor definitions, alternative portfolio construction settings, and constructing factor portfolios on a subsample of liquid bonds. Finally, allocating to corporate bond factors provides added value beyond allocating to equity factors in a multi-asset context.

Keywords: corporate bonds, factor premiums, strategic asset allocation, size, low-risk, value, momentum

JEL Classification: G11, G12, G14, E44

Suggested Citation

Houweling, Patrick and van Zundert, Jeroen, Factor Investing in the Corporate Bond Market (September 26, 2016). Financial Analysts Journal, 2017, Vol. 73, No. 2. Available at SSRN: or

Patrick Houweling (Contact Author)

Robeco Investment Research ( email )

Weena 850
Rotterdam, 3014 DA
+31-10-2243538 (Phone)


Jeroen Van Zundert

Robeco Asset Management ( email )

Weena 850
Rotterdam, 3014DA
+31-10-2243133 (Phone)

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