Cross-sectional Examination of the Corporate Bond Market Performance - The Rise of the Momentum and Contrarian Unidentified Factor Mimicking Corporate Bond Portfolios!

19 Pages Posted: 13 Oct 2020 Last revised: 18 Nov 2020

See all articles by Himanshu Verma

Himanshu Verma

Johns Hopkins University - Department of Economics

Ajakh Ahmad

Johns Hopkins University - Carey Business School

Jim Kyung-Soo Liew

Johns Hopkins University - Carey Business School

Date Written: September 8, 2020

Abstract


We examine momentum and reversal anomalies in corporate bond returns at the firm-level employing a novel dataset, SoKat Credit, comprising bonds of 323 of the largest and liquid companies over the period from 2002 to 2020. Our study documents significant short-term reversal in the cross-sectional of corporate bond returns concentrated at the one week interval with annualized returns on the zero investment long-short portfolio of 9.9%. We also document company-level momentum spillover effect into corporate bond returns when sorting on past equity returns, that is, our “bond-stock” strategy, which delivers annualized return of 5.0% is statistically significant and robust baring the usual suspects of caveats.

Keywords: Corporate Bond, Momentum, Short-term Reversal

Suggested Citation

Verma, Himanshu and Ahmad, Ajakh and Liew, Jim Kyung-Soo, Cross-sectional Examination of the Corporate Bond Market Performance - The Rise of the Momentum and Contrarian Unidentified Factor Mimicking Corporate Bond Portfolios! (September 8, 2020). Johns Hopkins Carey Business School Research Paper No. 20-15, Available at SSRN: https://ssrn.com/abstract=3689223 or http://dx.doi.org/10.2139/ssrn.3689223

Himanshu Verma (Contact Author)

Johns Hopkins University - Department of Economics ( email )

3400 Charles Street
Baltimore, MD 21218-2685
United States

Ajakh Ahmad

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

Jim Kyung-Soo Liew

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

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