Fixed Income Factors - Part II
SUMMARY
INTRODUCTION
In our last research article, we compared fixed income factors from two asset managers, namely AQR Capital Management and Robeco, which highlighted different security selection and portfolio construction processes. Although these two data sets included the same factors, eg value and momentum, these were completely uncorrelated, which raised the question of which data set is most suitable for running a factor exposure analysis on bond mutual funds (read Fixed Income Factors).
It is worth noting that these factors can be called style factors as they mimic how investors might select bonds, eg buying cheap, outperforming, or high-quality bonds. However, fixed income investors tend to use metrics like the term or credit spread when discussing bonds rather than highlighting a high exposure to the value factor.
In this research article, we will contrast style versus traditional fixed income factors.
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