Factor investing in developed corporate bond markets

Factor investing entails allocating to systematic strategies that historically have shown a higher Sharpe ratio than the entire market. Well-known factors are Value, Momentum, Size, Quality, and Low-Risk. Most of the research on factor investing has been conducted on equity markets. The literature for other markets, such as corporate bonds, government bonds, or commodities, is still limited.

The goal of this research project is to investigate these and other factors such as Liquidity for corporate bonds. Robeco’s Quant Fixed Income team has access to multiple historical databases of corporate bonds 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 corporate 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 Investment 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.

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Houweling and Van Zundert (2017) “Factor investing in the corporate bond market”, Financial Analysts Journal 73(2)

Brooks, Palhares and Richardson (2018) “Style investing in fixed income”, Journal of Portfolio Management 44(4)

Bai, Bali and Wen (2019) “Common risk factors in the cross-section of corporate bond returns”, Journal of Financial Economics 131(3).