Successful Factors to Select Outperforming Bonds
Posted: 4 Sep 2018
Date Written: January 30, 2001
We describe a way of selecting corporate bonds that will produce better performance than the market as a whole. This research has many similarities with the well-investigated field of factor based stock selection strategies. The variables that prove to have forecasting power are Bond momentum, Valuation measured by the spread and Equity revisions. A multi-factor strategy leads to an even better performance with stable results over time due to a low correlation between the variables. The strategy both selects winners and avoids losers.
Keywords: Factor Investing, Factors, Value, Momentum, Size, Credts, Corporate Bonds, Investment Decisions, Information and Market Efficiency, Portfolio Choice
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