Rates Factors and Global Asset Allocation

Journal of Fixed Income, Winter 2021, Vol. 30(3), pp. 6-25

Posted: 30 Jul 2020 Last revised: 11 Feb 2021

See all articles by Joshua Kothe

Joshua Kothe

affiliation not provided to SSRN

Harald Lohre

Invesco; Centre for Financial Econometrics, Asset Markets and Macroeconomic Policy, Lancaster University Management School

Carsten Rother

Invesco; University of Hamburg

Date Written: June 22, 2020

Abstract

Style factors that are prominent in other asset classes, such as carry, value, momentum, and defensive, do extend to the fixed income domain as well. We investigate factor investing across global government bonds and the use of such rates factors for a multi-asset investor. These rates factors significantly improve the investment opportunity set of investors, representing valuable tail hedges and offering diversification potential. Furthermore, complementing conservative multi-asset strategies by rates factors can enhance returns and reduce the likelihood and severity of downturns not only in-sample, but also in out-of-sample portfolio simulations.

Keywords: Factor-based models, style investing, fixed income, structured finance

JEL Classification: G11, G12

Suggested Citation

Kothe, Joshua and Lohre, Harald and Rother, Carsten, Rates Factors and Global Asset Allocation (June 22, 2020). Journal of Fixed Income, Winter 2021, Vol. 30(3), pp. 6-25, Available at SSRN: https://ssrn.com/abstract=3643280

Joshua Kothe

affiliation not provided to SSRN

Centre for Financial Econometrics, Asset Markets and Macroeconomic Policy, Lancaster University Management School

Bailrigg
Lancaster LA1 4YX
United Kingdom

HOME PAGE: http://www.lancaster.ac.uk/lums/research/research-centres/financial-econometrics/

Carsten Rother

Invesco ( email )

An der Welle 5
Frankfurt am Main, 60322
Germany

University of Hamburg ( email )

Allende-Platz 1
Hamburg, 20146
Germany

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