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Rates factors and global asset allocation

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<mark>Journal publication date</mark>31/01/2021
<mark>Journal</mark>Journal of Fixed Income
Issue number3
Volume30
Number of pages20
Pages (from-to)6-25
Publication StatusPublished
Early online date4/01/21
<mark>Original language</mark>English

Abstract

Style factors that are prominent in other asset classes, such as carry, value, momentum, and defensive, do extend to the fixed income domain as well. We investigate factor investing across global government bonds and the use of such rates factors for a multi-asset investor. These rates factors significantly improve the investment opportunity set of investors, representing valuable tail hedges and offering diversification potential. Furthermore, complementing conservative multi-asset strategies by rates factors can enhance returns and reduce the likelihood and severity of downturns not only in-sample, but also in out-of-sample portfolio simulations.