A fundamental bond index including solvency criteria

Marielle de Jong () and Lauren Stagnol

Journal of Asset Management, 2016, vol. 17, issue 4, No 6, 280-294

Abstract: Abstract Doubts are rising whether bond indices, in the way they are constructed, are effective in their role of representing the markets they are designed for. Since index constituents are defined on market shares – the larger the debt obligation, the larger the share in the index – it may be that certain risks related to a high level of indebtedness are being accentuated which are not necessarily representative for the market as a whole. Undue debt levels would in theory not arise in an information-efficient market, however, if prices are distorted and do not convey information efficiently, it makes sense to compensate for that and integrate elementary information on the debt issuers into the index construction process. We test how that works out on corporate bonds. We build an index that is based on firm accounting data rather than debt size, and give evidence that it serves as a market proxy.

Keywords: fundamental indexing; alternative corporate bond index; solvency criteria; market efficiency (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1057/jam.2016.15 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: A fundamental bond index including solvency criteria (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:assmgt:v:17:y:2016:i:4:d:10.1057_jam.2016.15

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/41260

DOI: 10.1057/jam.2016.15

Access Statistics for this article

Journal of Asset Management is currently edited by Marielle de Jong and Dan diBartolomeo

More articles in Journal of Asset Management from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().