TU Darmstadt / ULB / TUbiblio

Exploiting Uncertainty with Market Timing in Corporate Bond Markets

Bektic, D. and Regele, T. (2018):
Exploiting Uncertainty with Market Timing in Corporate Bond Markets.
In: Journal of Asset Management, Palgrave Macmillan, pp. 79-92, 19, (2), ISSN 1470-8272,
[Online-Edition: https://doi.org/10.1057/s41260-017-0063-6],
[Article]

Abstract

The purpose of this article is to show the usefulness of technical analysis in credit markets. We document that an application of a simple moving average timing strategy to US high-yield and US investment-grade corporate bond portfolios sorted by option-adjusted spread generates investment timing portfolios that substantially outperform the corresponding benchmark. For portfolios with high uncertainty, as measured by the option-adjusted spread, the abnormal returns generate economically and statistically significant returns relative to the capital asset pricing model, the four-factor model and additionally the bond factor model from Asness et al. (J Finance 68:929–985, 2013). Our results remain robust to different moving average formation periods, transaction costs, long–short portfolio construction techniques and alternative definitions of information uncertainty.

Item Type: Article
Erschienen: 2018
Creators: Bektic, D. and Regele, T.
Title: Exploiting Uncertainty with Market Timing in Corporate Bond Markets
Language: English
Abstract:

The purpose of this article is to show the usefulness of technical analysis in credit markets. We document that an application of a simple moving average timing strategy to US high-yield and US investment-grade corporate bond portfolios sorted by option-adjusted spread generates investment timing portfolios that substantially outperform the corresponding benchmark. For portfolios with high uncertainty, as measured by the option-adjusted spread, the abnormal returns generate economically and statistically significant returns relative to the capital asset pricing model, the four-factor model and additionally the bond factor model from Asness et al. (J Finance 68:929–985, 2013). Our results remain robust to different moving average formation periods, transaction costs, long–short portfolio construction techniques and alternative definitions of information uncertainty.

Journal or Publication Title: Journal of Asset Management
Volume: 19
Number: 2
Publisher: Palgrave Macmillan
Divisions: 01 Department of Law and Economics
01 Department of Law and Economics > Betriebswirtschaftliche Fachgebiete
01 Department of Law and Economics > Betriebswirtschaftliche Fachgebiete > Corporate finance
Date Deposited: 21 Dec 2017 08:45
Official URL: https://doi.org/10.1057/s41260-017-0063-6
Export:

Optionen (nur für Redakteure)

View Item View Item