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Factors and corporate bonds: Single- and multi-factor approaches to corporate credit

Investors have increasingly turned to equity factors as building blocks for their stock portfolios as a way to measure performance, analyze risk exposures or seek enhanced returns. In recent years, some investors have sought to extend a factor framework to fixed income. But these efforts by and large have not been successful, as equity and fixed-income investors have not been speaking a common language. We simulated the performance of six fixed-income factors — value, low size, quality, momentum, carry and low risk — that broadly align with MSCI’s equity factors. Did these factors offer a risk-return edge?


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