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Common factors in corporate bond returns

Forthcoming in the Journal of Investment Management

51 Pages Posted: 13 Mar 2015 Last revised: 31 Aug 2017

Ronen Israel

AQR Capital Management, LLC

Diogo Palhares

AQR Capital Management, LLC

Scott A. Richardson

AQR Capital Management, LLC; London Business School

Date Written: June 5, 2017

Abstract

We find that four well-known characteristics (carry, defensive, momentum and value) explain a significant portion of the cross-sectional variation in corporate bond excess returns. These characteristics have positive risk-adjusted expected returns and are not subsumed by traditional market premia or respective equity anomalies. The returns are economically significant, not explained by macroeconomic exposures, and there is some evidence that mispricing plays a role, especially for momentum.

Keywords: corporate bonds, mispricing

JEL Classification: G12, G14, M41

Suggested Citation

Israel, Ronen and Palhares, Diogo and Richardson, Scott A., Common factors in corporate bond returns (June 5, 2017). Forthcoming in the Journal of Investment Management. Available at SSRN: https://ssrn.com/abstract=2576784 or http://dx.doi.org/10.2139/ssrn.2576784

Ronen Israel

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Diogo Palhares

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Scott Anthony Richardson (Contact Author)

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

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