An Empirical Analysis of the Benefits of Corporate Bond Portfolio Optimization in the Presence of Duration Constraints

Romain Deguest, Lionel Martellini and Vincent Milhau
Additional contact information
Romain Deguest: LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique
Lionel Martellini: EDHEC - EDHEC Business School - UCL - Université catholique de Lille
Vincent Milhau: EDHEC - EDHEC Business School - UCL - Université catholique de Lille

Post-Print from HAL

Abstract: This article analyzes the out-of-sample performance of portfolio optimization models in the US corporate bond universe. In our empirical study, we measure the benefits of naive diversification and find that it eventually reaches a limit as the number of bonds increases. Also, we observe substantial improvements in the risk-adjusted performance of scientific portfolio constructions when compared to simple barbell strategies for the same given duration. When duration constraints are relaxed, we find that both naively and scientifically diversified portfolios outperform cap-weighted benchmarks in terms of Sharpe ratio.

Date: 2022-04-01
References: Add references at CitEc
Citations:

Published in Journal of fixed income, 2022, 31 (4), pp.50-82. ⟨10.3905/jfi.2022.1.128⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
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:hal:journl:hal-03700858

DOI: 10.3905/jfi.2022.1.128

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().