Factor investing in emerging credit markets

Factor investing entails allocating to systematic strategies that historically have shown a higher Sharpe ratio than the market. Well-known factors are Value, Momentum, Size and Low-risk. Most of the research on factor investing has been conducted on equity markets. The academic literature for factor investing in credit markets has not been as developed as for equities. In particular, hardly any work has been done on emerging credits, while the asset class has rapidly gained popularity amongst investors in the current low yield environment.

The goal of this research project is to investigate factor investing in emerging markets (EM) credits. Building upon earlier research by Robeco in this field, we want you to focus on specific aspects of emerging markets. Using the same straightforward developed market factor definitions Dekker, Houweling, and Muskens (2019) provided out-of-sample evidence for the existence of factors. They have found that the factors Value, Momentum, Size and Low-risk deliver significantly higher risk-adjusted returns in emerging markets credits as well. In this internship we want to go one step further and see how factor definitions can be improved when taking the EM credit specific risks into account. One of the key challenges will be to deal with the diverse nature of EM credits. Country risks can be a dominant driver of risk and return, potentially more so than in developed markets.

Robeco Quantitative Research has access to a unique historical database of bond data that enables back-testing and evaluating of factor strategies. You will conduct a literature study and implement various factors to determine their predictive power for bond returns.

The project covers the entire quant model development cycle: analyzing the data, programming the back-tests, 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 Research department. Practical feedback will be provided by several credit portfolio managers. Creative, analytic and programming skills are essential in order to successfully complete the project.

Are you interested?
Let us know your motivation and send it together with your top-3 favorite internship topics, your CV and list of grades to SQ@robeco.nl.
Available internships Previous internships


Bloomberg.com (2017) https://www.bloomberg.com/news/articles/2017-09-17/as-china-s-bond-market-opens-global-funds-see-watershed-moment

Dekker, Houweling, and Muskens (2019) “Factor investing in emerging market credits”, SSRN working paper.

Houweling and Van Zundert (2017) “factor investing in corporate bonds”, Financial Analysts Journal

Israel, Palhares, and Richardson (2018) “Common factors in corporate bond returns ”, Journal of Investment Management.