Low-Risk Anomalies in Global Fixed Income

Download or read book Low-Risk Anomalies in Global Fixed Income written by Raul Leote de Carvalho and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we present the most compelling empirical evidence yet of a low-risk anomaly in fixed income markets. We show that portfolios invested in bonds with the lowest risk would have delivered the largest positive alpha and highest Sharpe ratios and portfolios invested in riskier bonds would have delivered the most negative alpha and lowest Sharpe ratios. Our results proved extremely robust and were confirmed for government bonds, quasi-government and foreign government bonds, securitized and collateralized bonds, corporate investment grade bonds, corporate high yield bonds, emerging market bonds and aggregates of some of these universes. We considered bonds denominated in USD, EUR, GBP and JPY separately and the results proved invariant to the currency. We confirmed the robustness of the results by using different measures of risk. The results were produced using data from the Bank of America Merrill Lynch database from January 1997 which includes 85,442 individual bonds in the 192 months analyzed.