Extending Fama-French Factors to Corporate Bond Markets

4 Pages Posted: 18 Jan 2016 Last revised: 26 Oct 2020

See all articles by Demir Bektic

Demir Bektic

Technical University of Darmstadt; International University of Monaco

Josef-Stefan Wenzler

Qube Capital Solutions, LLC; Abaris Investment Management; IQ-KAP; Deka Investment GmbH

Michael Wegener

Deka Investment GmbH

Dirk Schiereck

Technical University of Darmstadt

Timo Spielmann

Deka Investment GmbH; IQ-KAP

Date Written: February 1, 2017

Abstract

The explanatory power of size, value, profitability and investment has been extensively studied for equity markets. Yet, the relevance of these factors in global credit markets is less explored although equities and bonds should be related according to structural credit risk models. We investigate the impact of the four Fama-French factors in the U.S. and European credit space. While all factors exhibit economically and statistically significant excess returns in the U.S. high yield market, we find mixed evidence for U.S. and European investment grade markets. Nevertheless, we show that investable multi-factor portfolios outperform the corresponding corporate bond benchmarks on a risk-adjusted basis. Finally, our results highlight the impact of company level characteristics on the joint return dynamics of equities and corporate bonds.

Keywords: corporate bonds, risk premia, factors, size, value, profitability, investment

JEL Classification: G11, G12, G14

Suggested Citation

Bektic, Demir and Wenzler, Josef-Stefan and Wegener, Michael and Schiereck, Dirk and Spielmann, Timo, Extending Fama-French Factors to Corporate Bond Markets (February 1, 2017). Journal of Portfolio Management, 45 (3), 141-158, 2019, https://jpm.pm-research.com/content/45/3/141, Available at SSRN: https://ssrn.com/abstract=2715727 or http://dx.doi.org/10.2139/ssrn.2715727

Demir Bektic (Contact Author)

Technical University of Darmstadt ( email )

Universitaets- und Landesbibliothek Darmstadt
Magdalenenstrasse 8
Darmstadt, Hesse D-64289
Germany

International University of Monaco ( email )

Le Stella
14 Rue Hubert Clerissi
Monaco, Monaco MC-98000
Monaco

Josef-Stefan Wenzler

Qube Capital Solutions, LLC ( email )

83 Parsons Dr
West Hartford, CT 06117
United States

Abaris Investment Management ( email )

Bächaustrasse 61
Bäch, 8806
Switzerland

IQ-KAP ( email )

Frankfurt am Main
Germany

Deka Investment GmbH ( email )

Mainzer Landstrasse 16
Frankfurt am Main, 60325
Germany

Michael Wegener

Deka Investment GmbH ( email )

Mainzer Landstrasse 16
Frankfurt am Main, 60325
Germany

Dirk Schiereck

Technical University of Darmstadt ( email )

Universitaets- und Landesbibliothek Darmstadt
Magdalenenstrasse 8
Darmstadt, Hesse D-64289
Germany

Timo Spielmann

Deka Investment GmbH ( email )

Mainzer Landstrasse 16
Frankfurt am Main, 60325
Germany

IQ-KAP ( email )

Frankfurt am Main
Germany

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