Skip to main content

Main menu

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JFI
    • Editorial Board
    • Published Ahead of Print (PAP)
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

User menu

  • Sample our Content
  • Request a Demo
  • Log in

Search

  • ADVANCED SEARCH: Discover more content by journal, author or time frame
The Journal of Fixed Income
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Sample our Content
  • Request a Demo
  • Log in
The Journal of Fixed Income

The Journal of Fixed Income

ADVANCED SEARCH: Discover more content by journal, author or time frame

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JFI
    • Editorial Board
    • Published Ahead of Print (PAP)
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

Factor Investing in Corporate Bond Markets: Enhancing Efficacy Through Diversification and Purification!

Thomas Heckel, Zine Amghar, Isaac Haik, Olivier Laplénie and Raul Leote de Carvalho
The Journal of Fixed Income Winter 2020, 29 (3) 6-21; DOI: https://doi.org/10.3905/jfi.2019.1.074
Thomas Heckel
is co-head of the Quant Research Group at BNP Paribas Asset Management in Paris, France
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
Zine Amghar
is head of Fixed Income in the Quant Research Group at BNP Paribas Asset Management in Paris, France
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
Isaac Haik
is a data scientist in the Quant Research group at BNP Paribas Asset Management in Paris, France
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
Olivier Laplénie
is head of quantitative fixed income portfolio management in the Multi-Assets, Quant and Systematic team at BNP Paribas Asset Management in Paris, France
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
Raul Leote de Carvalho
is deputy head of the Quant Research Group at BNP Paribas Asset Management in Paris, France
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
Loading

Click to login and read the full article.

Don’t have access? Click here to request a demo 
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600

Abstract

We show that factors from value, quality, low-risk, and momentum styles play an important role in explaining the cross-section of corporate bond expected returns for the US and Euro Investment Grade and US BB-B Nonfinancial High Yield universes. We demonstrate the importance of purifying factor data by neutralizing a number of risk biases that are present in the factors: controlling for sectors, option-adjusted spread, duration, and size biases significantly increase the predictive power of style factors. We propose a new simple approach for efficiently neutralizing the biases from multiple risk variables and demonstrate its superiority relative to stratified sampling and optimization as alternative control methods. We also measure the added value from diversifying the number of factors in each style. Finally, we show that the results are robust in relation to transaction costs and can be used to design strategies that aim at outperforming traditional benchmark indexes.

TOPICS: Analysis of individual factors/risk premia, factor-based models, style investing

Key Findings

  • • Factors from value, quality, low-risk, and momentum styles play an important role in explaining the cross-section of corporate bond expected returns for the US and Euro Investment Grade and US BB-B Nonfinancial High Yield universes.

  • • The forecasting efficacy of style factors increases significantly if biases such as sectors, option-adjusted spread, duration, and size in the factor data are neutralized. Diversifying the number of factors in each style also significantly improves the forecasting efficacy.

  • • We propose a new simple approach for increasing the forecasting efficacy of style factors by efficiently neutralizing the biases from multiple risk variables. We demonstrate the superiority of this approach over stratified sampling and optimization.

  • © 2019 Pageant Media Ltd
View Full Text

Don’t have access? Click here to request a demo

Alternatively, Call a member of the team to discuss membership options

US and Overseas: +1 646-931-9045

UK: 0207 139 1600

Log in using your username and password

Forgot your user name or password?
PreviousNext
Back to top

Explore our content to discover more relevant research

  • By topic
  • Across journals
  • From the experts
  • Monthly highlights
  • Special collections

In this issue

The Journal of Fixed Income: 29 (3)
The Journal of Fixed Income
Vol. 29, Issue 3
Winter 2020
  • Table of Contents
  • Index by author
  • Complete Issue (PDF)
Print
Download PDF
Article Alerts
Sign In to Email Alerts with your Email Address
Email Article

Thank you for your interest in spreading the word on The Journal of Fixed Income.

NOTE: We only request your email address so that the person you are recommending the page to knows that you wanted them to see it, and that it is not junk mail. We do not capture any email address.

Enter multiple addresses on separate lines or separate them with commas.
Factor Investing in Corporate Bond Markets: Enhancing Efficacy Through Diversification and Purification!
(Your Name) has sent you a message from The Journal of Fixed Income
(Your Name) thought you would like to see the The Journal of Fixed Income web site.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Citation Tools
Factor Investing in Corporate Bond Markets: Enhancing Efficacy Through Diversification and Purification!
Thomas Heckel, Zine Amghar, Isaac Haik, Olivier Laplénie, Raul Leote de Carvalho
The Journal of Fixed Income Dec 2019, 29 (3) 6-21; DOI: 10.3905/jfi.2019.1.074

Citation Manager Formats

  • BibTeX
  • Bookends
  • EasyBib
  • EndNote (tagged)
  • EndNote 8 (xml)
  • Medlars
  • Mendeley
  • Papers
  • RefWorks Tagged
  • Ref Manager
  • RIS
  • Zotero
Save To My Folders
Share
Factor Investing in Corporate Bond Markets: Enhancing Efficacy Through Diversification and Purification!
Thomas Heckel, Zine Amghar, Isaac Haik, Olivier Laplénie, Raul Leote de Carvalho
The Journal of Fixed Income Dec 2019, 29 (3) 6-21; DOI: 10.3905/jfi.2019.1.074
del.icio.us logo Digg logo Reddit logo Twitter logo Facebook logo Google logo LinkedIn logo Mendeley logo
Tweet Widget Facebook Like LinkedIn logo

Jump to section

  • Article
    • Abstract
    • DATA
    • CREDIT FACTORS
    • METHODOLOGY
    • RESULTS
    • CONCLUSIONS
    • ADDITIONAL READING
    • Disclaimer
    • REFERENCES
  • Info & Metrics
  • PDF (Subscribers Only)
  • PDF (Subscribers Only)

Similar Articles

Cited By...

  • No citing articles found.
  • Google Scholar
LONDON
One London Wall, London, EC2Y 5EA
United Kingdom
+44 207 139 1600
 
NEW YORK
41 Madison Avenue, New York, NY 10010
USA
+1 646 931 9045
pm-research@pageantmedia.com
 

Stay Connected

  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

MORE FROM PMR

  • Home
  • Awards
  • Investment Guides
  • Videos
  • About PMR

INFORMATION FOR

  • Academics
  • Agents
  • Authors
  • Content Usage Terms

GET INVOLVED

  • Advertise
  • Publish
  • Article Licensing
  • Contact Us
  • Subscribe Now
  • Log in
  • Update your Profile
  • Give us your feedback

© 2022 Pageant Media Ltd | All Rights Reserved | ISSN: 1059-8596 | E-ISSN: 2168-8648

  • Site Map
  • Terms & Conditions
  • Privacy Policy
  • Cookies