Common factors in corporate bond returns

Israel, R, Palhares, D and Richardson, S A (2018) Common factors in corporate bond returns. Journal of Investment Management, 16 (2). ISSN 1545-9144

Abstract

We find that four well-known characteristics (carry, defensive, momentum and value) explain a significant portion of the cross-sectional variation in corporate bond excess returns. These characteristics have positive risk-adjusted expected returns and are not subsumed by traditional market premia or respective equity anomalies. The returns are economically significant, not explained by macroeconomic exposures, and there is some evidence that mispricing plays a role, especially for momentum.