Posts Tagged ‘high yield’
In 1993, the Journal of Financial Economics published “Common risk factors in the returns of stocks and bonds” by Fama and French. They examined bond returns in particular through the lens of various asset return models.
Let’s look at one of those models: the Fama/French three-factor model. The regression statistics of various bond classes are summarized in the table below:
| Bond class | 1-5G | 6-10G | Aaa | Aa | A | Baa | <Baa |
| Alpha | 0.72% | 0.84% | -0.84% | -0.85% | -0.96% | -0.6% | -1.32% |
| Beta | 0.1 | 0.18 | 0.25 | 0.25 | 0.26 | 0.27 | 0.34 |
| S | -0.06 | -0.14 | -0.12 | -0.11 | -0.09 | -0.04 | 0.04 |
| V | 0.07 | 0.08 | 0.14 | 0.15 | 0.16 | 0.2 | 0.23 |
The Investment Scientist 