Factor Investing in Sovereign Bond Markets: Deep Sample Evidence

24 Pages Posted: 25 Jun 2021

See all articles by Guido Baltussen

Guido Baltussen

Erasmus University Rotterdam (EUR); Robeco Quantitative Investments

Martin Martens

Erasmus University Rotterdam

Olaf Penninga

Robeco Asset Management

Date Written: June 22, 2021

Abstract

We examine government bond factor premiums in a deep global sample from 1800 to 2020 spanning the major markets and maturities. Bond factors (Value, Momentum, Low-risk) offer attractive premiums that do not decay across samples, are persistent over time, and consistent across various market and macroeconomic scenarios. The factor premiums diversify to each other, as well as to bond or equity market risks. A combined multi-factor bond strategy provides the strongest risk-adjusted returns. These results strongly show a consistent added value of government bond factor premiums over a passive bond portfolio.

Keywords: factor investing, bond risk premia, asset pricing, market efficiency, momentum, value, carry, low-risk

JEL Classification: G11, G12

Suggested Citation

Baltussen, Guido and Martens, Martin and Penninga, Olaf, Factor Investing in Sovereign Bond Markets: Deep Sample Evidence (June 22, 2021). Available at SSRN: https://ssrn.com/abstract=3873863 or http://dx.doi.org/10.2139/ssrn.3873863

Guido Baltussen (Contact Author)

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Robeco Quantitative Investments ( email )

Weena 850
Rotterdam, 3011 AG
Netherlands

Martin Martens

Erasmus University Rotterdam ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands
(+31)10-4088929 (Phone)

Olaf Penninga

Robeco Asset Management ( email )

Rotterdam, 3011 AG
Netherlands

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