RT Journal Article
SR Electronic
T1 The Hunt for a Low-Risk Anomaly in the USD Corporate Bond Market
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 63
OP 84
DO 10.3905/jpm.2015.42.1.063
VO 42
IS 1
A1 Kwok Yuen Ng
A1 Bruce D. Phelps
YR 2015
UL https://pm-research.com/content/42/1/63.abstract
AB Low-risk (i.e., low-beta) equities have been found to have higher risk-adjusted returns than do their high-risk (high-beta) counterparts. This is a low-risk anomaly. Some argue that this phenomenon is ubiquitous in financial markets. Do U.S. corporate bonds show the same phenomenon? To investigate, the authors sort corporate bonds according to various common risk measures and examine whether risk-adjusted returns decline as risk measure, they find conflicting evidence of a low-risk anomaly. Risk measures that are poor at sorting bonds by risk show evidence of an anomaly. However, risk measures that are good at identifying ex ante risk show little evidence to support a low-risk anomaly. In general, the authors find little evidence to support a low-risk anomaly in corporate bonds.TOPICS: Fundamental equity analysis, analysis of individual factors/risk premia