Common Equity Factors in Corporate Bond Markets

Common Equity Factors in Corporate Bond Markets, in Jurczenko, E. (Ed.), Factor Investing, ISTE Press – Elsevier, 2017.

Posted: 3 May 2017 Last revised: 12 Sep 2017

See all articles by Demir Bektic

Demir Bektic

Deka Investment GmbH; Darmstadt University of Technology; IQ-KAP; International University of Monaco

Dr. Ulrich Neugebauer

Deka Investment GmbH

Michael Wegener

Deka Investment GmbH

Josef-Stefan Wenzler

Abaris Investment Management; IQ-KAP; Deka Investment GmbH

Date Written: May 2, 2017

Abstract

Size, value, momentum and beta factors have been extensively studied for equity markets, but their impact on corporate bond markets is much less explored. Since structural models based on contingent claims link credit and equity securities, we study if these factors extend their success in equity markets to U.S. credit markets. While size, value and momentum are economically and statistically significant in the U.S. high yield space we find that only size and momentum have explanatory power for the U.S. investment grade market. Finally, we combine size, value, momentum and beta to construct equal-weighted, investable, long-only, multi-factor portfolios and demonstrate that these portfolios outperform traditional fixed-income benchmarks on a risk-adjusted basis.

Keywords: corporate bonds, factor investing, risk premium, size, value, momentum, beta

JEL Classification: G11, G12, G14

Suggested Citation

Bektic, Demir and Neugebauer, Ulrich and Wegener, Michael and Wenzler, Josef-Stefan, Common Equity Factors in Corporate Bond Markets (May 2, 2017). Common Equity Factors in Corporate Bond Markets, in Jurczenko, E. (Ed.), Factor Investing, ISTE Press – Elsevier, 2017.. Available at SSRN: https://ssrn.com/abstract=2961848

Demir Bektic (Contact Author)

Deka Investment GmbH ( email )

Mainzer Landstrasse 16
Frankfurt am Main, 60325
Germany

Darmstadt University of Technology ( email )

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

IQ-KAP ( email )

Frankfurt am Main
Germany

International University of Monaco ( email )

2 Av Prince Hereditaire Albert
Stade Louis II/B
Monaco, Monaco MC-98000
United States

Ulrich Neugebauer

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

Josef-Stefan Wenzler

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

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