Is Macro-Economic Risk Rewarded in Corporate Bond Markets?
In recent years, there have been numerous examples of macro-economic risks affecting stock and corporate bond prices, such as the slump in commodity prices and the slowdown in China. This does not only affect companies directly involved, for example mining companies and Chinese companies, but also companies doing business with the affected industries or countries. The challenge in this internship project is to identify companies with exposure to specific macro-economic risks. The next question is whether corporate bond investors are rewarded for bearing these risks. In the academic literature, the impact of macro-economic risks on corporate bond prices has barely been documented. An exception is Hyman et al. (2014), who show that there is evidence of sovereign risk spilling over into corporate bond spreads.
At Robeco we are managing about EUR 25bln in global corporate bonds, of which about EUR 4 bln in model-driven investment strategies. Broadening our understanding of macro-economic risk factors enables us to improve our portfolios. Robeco has an extensive corporate bond database spanning more than 20 years for this project.
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 research reports and giving presentations. 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 credit portfolio managers and researchers. Creative, analytic and programming skills are essential in order to successfully complete the project.
Hyman, Baldaque da Silva, Eisenthal-Berkovitz, El Khanjar, Maitra, Polbennikov, “Sovereign Risk Spillover into Euro Corporate Spreads”, Journal of Fixed Income, 2014, 24 (1) ,pp. 51-74