Which Factors for Corporate Bond Returns?

Thuy Duong Dang, Fabian Hollstein, Marcel Prokopczuk and Zhiguo He ()

The Review of Asset Pricing Studies, 2023, vol. 13, issue 4, 615-652

Abstract: Factors related to carry, duration, equity momentum, and the term structure are the most important risk factors in corporate bond markets. From a large set of factor candidates, we condense an optimal model with a two-step approach. First, we filter out factors that do not systematically move bond prices. Second, we use a Bayesian model selection approach to determine the optimal, parsimonious model. Many prominent factors do not move prices or are redundant. We document the new model’s good performance compared to that of existing models in time-series and cross-sectional tests and analyze the economic drivers of the factors.

JEL-codes: C11 C52 G12 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:oup:rasset:v:13:y:2023:i:4:p:615-652.

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