Residual Equity Momentum Spillover in Global Corporate Bond Markets

Posted: 30 Aug 2018 Last revised: 10 Jan 2019

See all articles by Demir Bektic

Demir Bektic

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

Date Written: July 1, 2018

Abstract

I present an improved equity momentum measure for corporate bonds and study the Euro denominated global investment grade corporate bond market between 2000 and 2016. I document economically meaningful and statistically significant corporate bond return predictability. In contrast to the widely used total equity return, momentum as measured by the residual (idiosyncratic) equity return appears to further enhance risk-adjusted performance of corporate bond investors. Additional support for this conjecture is obtained from tests for various asset pricing factors and transaction costs, as exposure to these risk factors cannot explain this abnormal pattern in returns.

Keywords: residual equity momentum, spillover, corporate bonds, anomalies, factor investing, risk premium

JEL Classification: F3, G1, G11, G12, G14

Suggested Citation

Bektic, Demir, Residual Equity Momentum Spillover in Global Corporate Bond Markets (July 1, 2018). Journal of Fixed Income 28 (3), 46-54, 2019. Available at SSRN: https://ssrn.com/abstract=3236165

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

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