Beyond Carry and Momentum in Government Bonds

42 Pages Posted: 7 Sep 2019 Last revised: 13 Sep 2019

See all articles by Jerome Gava

Jerome Gava

BNP Paribas; Ecole Polytechnique

William Lefebvre

Laboratoire de Probabilités, Statistique et Modélisation (LPSM); BNP Paribas

Julien Turc

BNP Paribas; Ecole Polytechnique

Date Written: September 11, 2019

Abstract

This article revisits recent literature on factor investing in government bonds, in particular regarding the definition of value and defensive investing. Using techniques derived from machine learning, the authors identify the key drivers of government bond futures and the groups of factors that are most genuinely relevant. Beyond carry and momentum, they propose an approach to defensive investing that considers the safe-haven nature of government bonds. These two main styles may be complemented by value and a reversal factor in order to achieve returns independently from broad movements in interest rates.

Keywords: Factor and style investing, xed income, macroeconomy, macro- nance, seasonality, mean-reversion, machine learning, variables selection, panel regression, clustering, covariance selection, selection bias under multiple testing

JEL Classification: G12, C31, C38, E43, E44

Suggested Citation

Gava, Jerome and Lefebvre, William and Turc, Julien, Beyond Carry and Momentum in Government Bonds (September 11, 2019). Available at SSRN: https://ssrn.com/abstract=3446653 or http://dx.doi.org/10.2139/ssrn.3446653

Jerome Gava

BNP Paribas ( email )

20 Boulevard des Italiens
Paris, 75009
France

Ecole Polytechnique ( email )

Route de Saclay
Palaiseau, 91128
France

HOME PAGE: http://https://portail.polytechnique.edu/economie/en

William Lefebvre

Laboratoire de Probabilités, Statistique et Modélisation (LPSM) ( email )

5 Rue Thomas Mann
Paris, Paris 75013
France

BNP Paribas ( email )

20 Boulevard des Italiens
Paris, 75009
France

Julien Turc (Contact Author)

BNP Paribas ( email )

20 boulevard des Italiens
Paris, 75009
France

Ecole Polytechnique ( email )

Route de Saclay
Palaiseau, 91120
France

HOME PAGE: http://https://portail.polytechnique.edu/economie/en

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