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High Frequency Integration of Equity and Corporate Bond Markets

Robeco is one of the world's leading quantitative asset managers which manages over 30bln EUR in rules-based capabilities. The product range spans a variety of strategies that invest in equities, corporate bonds and other asset classes. Within Investment Research, we are responsible for designing these quantitative strategies, including the development of new trading signals. In this research project, you will analyze the spillover of information from equities to corporate bonds and vice versa to enhance our strategies. In the academic literature, there exists evidence for spill-over effects between equities and corporates bonds of the same company, for instance that past stock returns predict future bond returns (Gebhardt et al., 2005) and vice versa (Ben Dor and Xu, 2015). Another stream of literature focuses on capital structure arbitrage, i.e. trading on the relative valuation of equity and bond (CDS) of the same company (Yu, 2006). However, none have looked at these relations at an intra-day frequency. With the increasing availability of large datasets and the tools to process them, this project focuses on spillovers between the equity and corporate bond markets at the intra-day level.

The project covers the entire quant model development cycle: analyzing the data, building the model, analyzing the results, discussing results with researchers and portfolio managers, writing a research report and giving a presentation. As with all Super Quant internships, the assignment will be supervised by an experienced empirical researcher of Robeco’s Quantitative Strategies department. Practical feedback will be provided by several credit portfolio managers and traders. Creative, analytic and programming skills are essential in order to successfully complete the project. Due to the presence of both technical and finance components, this project is suited for candidates with and without knowledge of finance.

 

Dor, A. B., & Xu, Z. (2015). Should Equity Investors Care about Corporate Bond Prices? Using Bond Prices to Construct Equity Momentum Strategies. The Journal of Portfolio Management, 41(4), 35-49.

Gebhardt, W. R., Hvidkjaer, S., & Swaminathan, B. (2005). Stock and bond market interaction: Does momentum spill over?. Journal of Financial Economics, 75(3), 651-690.

Yu, F. (2006). How profitable is capital structure arbitrage?. Financial Analysts Journal, 62(5), 47-62.
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Are you interested?

Let us know your motivation and send it together with your CV and list of grades to SQ@robeco.nl.