The low beta anomaly: A corporate bond investor's perspective

Demir Bektić

Review of Financial Economics, 2018, vol. 36, issue 4, 300-306

Abstract: The low beta anomaly is well documented for equity markets. However, the existence of such a factor in corporate bond markets is less explored. I find that European corporate bonds of firms with a low equity beta have higher risk‐adjusted returns, on average, than European corporate bonds of firms with a high equity beta. The results are economically and statistically significant as low beta credit portfolios improve the Sharpe ratio up to 30%. Moreover, even after accounting for transaction costs and by considering long‐only portfolios, the risk‐adjusted return remains substantial indicating practical implementability of the strategy for corporate bond investors.

Date: 2018
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https://doi.org/10.1002/rfe.1022

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Persistent link: https://EconPapers.repec.org/RePEc:wly:revfec:v:36:y:2018:i:4:p:300-306

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