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Factor decomposition and diversification in European corporate bond markets

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  • Pieterse-Bloem, Mary
  • Mahieu, Ronald J.

Abstract

In this paper we present an analysis of diversification strategies on portfolios of European corporate bonds. From the perspective of a US-based investor we study whether mean–variance diversification strategies change as a result of the introduction of the European Economic and Monetary Union (EMU). Using a comprehensive and unique data set of European corporate bonds we show that country factors are more important than industry factors to describe the cross-section of European corporate bonds. In particular we find that in the Post-EMU period country factors remain important.

Suggested Citation

  • Pieterse-Bloem, Mary & Mahieu, Ronald J., 2013. "Factor decomposition and diversification in European corporate bond markets," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 194-213.
    • Handle: RePEc:eee:jimfin:v:32:y:2013:i:c:p:194-213
    DOI: 10.1016/j.jimonfin.2012.04.005
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    2. Pieterse-Bloem, Mary & Qian, Zhaowen & Verschoor, Willem & Zwinkels, Remco, 2016. "Time-varying importance of country and industry factors in European corporate bonds," Journal of Empirical Finance, Elsevier, vol. 38(PA), pages 429-448.

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    More about this item

    Keywords

    Corporate bonds; Europe; Allocation strategies; EMU; Factor models;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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