An Empirical Analysis of Priced Systematic Risk on Bonds and Market Segmentation

• In Event: Financial Accounting & Reporting # 3
  In Paper Session: Financial Accounting and Reporting # 3

Abstract

This research investigates the existence of segmentation in the market for fixed-income securities. Evidence is found for diversified investors to earn abnormal profits from long (short) positions on investment grade bonds making larger (smaller) contributions to the risk of pure debt portfolios. Conversely, junk bonds are found to have lower risk-adjusted returns when they are more correlated with the returns on an index of fixed-income securities.

Author

• Liang Fu, Oakland University