Factor Investing in Emerging Market Credits

The Journal of Index Investing, Forthcoming

25 Pages Posted: 1 Oct 2019 Last revised: 6 Jul 2021

See all articles by Lennart Dekker

Lennart Dekker

Tilburg University - Department of Finance

Patrick Houweling

Robeco Asset Management

Frederik Muskens

Robeco Investment Research

Date Written: June 28, 2021

Abstract

We examine factors in a novel dataset on the cross-section of emerging market hard currency corporate bonds. We find that the size, low-risk, value, and momentum factors predict future excess returns. Single-factor and multi-factor portfolios obtain economically and statistically significant premiums. Further, alphas remain significant after controlling for exposures to developed market credit factors. The factor portfolios benefit from bottom-up allocations to countries, sectors, ratings, and maturity segments, as well as from bond selection within these segments. Higher risk-adjusted returns of factor portfolios can also be found within liquid subsamples of the market.

Keywords: factor investing, corporate bonds, emerging markets

JEL Classification: G11, G12, G15

Suggested Citation

Dekker, Lennart and Houweling, Patrick and Muskens, Frederik, Factor Investing in Emerging Market Credits (June 28, 2021). The Journal of Index Investing, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3457127 or http://dx.doi.org/10.2139/ssrn.3457127

Lennart Dekker

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Patrick Houweling (Contact Author)

Robeco Asset Management ( email )

Weena 850
Rotterdam, 3014 DA
Netherlands
+31-10-2243538 (Phone)

HOME PAGE: http://www.robeco.com/quant

Frederik Muskens

Robeco Investment Research ( email )

Weena 850
Rotterdam, 3014 DA
Netherlands

HOME PAGE: http://www.robeco.com/quant

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
677
Abstract Views
2,876
Rank
59,157
PlumX Metrics