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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, the authors 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.
TOPICS: Analysis of individual factors/risk premia, factor-based models, style investing, fixed income and structured finance, big data/machine learning
Key Findings
• 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, the authors propose an approach to defensive investing that considers the safe-haven nature of government bonds.
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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