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The low beta anomaly: A corporate bond investor's perspective

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  • Demir Bektić

Abstract

The low beta anomaly is well documented for equity markets. However, the existence of such a factor in corporate bond markets is less explored. I find that European corporate bonds of firms with a low equity beta have higher risk‐adjusted returns, on average, than European corporate bonds of firms with a high equity beta. The results are economically and statistically significant as low beta credit portfolios improve the Sharpe ratio up to 30%. Moreover, even after accounting for transaction costs and by considering long‐only portfolios, the risk‐adjusted return remains substantial indicating practical implementability of the strategy for corporate bond investors.

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  • Demir Bektić, 2018. "The low beta anomaly: A corporate bond investor's perspective," Review of Financial Economics, John Wiley & Sons, vol. 36(4), pages 300-306, October.
    • Handle: RePEc:wly:revfec:v:36:y:2018:i:4:p:300-306
    DOI: 10.1002/rfe.1022
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    References listed on IDEAS

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