Following the reduced-form models of Duffee (1999) and Jarrow, Lando and Yu (2005), this study investigates the risk diversification issue of corporate bond portfolios. Considering especially long run market behavior, our empirical decomposition of corporate bond yield spreads indicates that the...

In this study, we employ a statistical arbitrage approach to demonstrate that momentum investment strategy tend to work better in periods longer than six months, a result different from findings in past literature. Compared with standard parametric tests, the statistical arbitrage method...

This study recalibrates corporate bond idiosyncratic risks in an international context. Applying a statistically powerful risk decomposition scheme, we show in this study that diversification is improved by the addition of a global risk benchmark. We build a long-run stationary yield spread...