A Methodology for Computing and Comparing Implied Equity and Corporate Debt Sharpe Ratios

Goldberg, Robert S.

doi:10.2139/ssrn.1844828

Cited by 1 publication

(1 citation statement)

References 28 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…To combine return and volatility into one performance measure, we use the Sharpe ratio, which is defined as the mean of the excess returns over the risk-free rate divided by the standard deviation of the excess returns (Sharpe 1994). As a measure of bond portfolio performance, the Sharpe ratio is widely used by both investment professionals (Malvey 2005) and bond researchers (Goldberg 2015). To control for the characteristic differences and formally test the Sharpe ratio differentials of the sector portfolios, we construct two sector portfolios using a bond-level characteristic matching approach as follows.…”

Section: Sample and Datamentioning

confidence: 99%

Relative value in corporate bond sectors

Leng

Noronha

2018

Rev Quant Finan Acc

View full text Add to dashboard Cite

It is common knowledge that financial sector bonds underperformed on a relative basis immediately following the financial crisis of 2008. We use the portfolio Sharpe ratio and factor regression models to gauge the relative performance of the financial, industrial and utility sectors on a risk-adjusted basis. As the data demonstrate, the underperformance of financial-sector bonds relative to other sectors exists not just for the post-crisis period of 2008-2015 but for the entire sample period of 1996-2015. In our sample of corporate bonds, the utility sector has the best relative performance during 1996-2015. Industrial sector bonds have similar performance to financials in the pre-crisis period and only outperform them post 2008. We find that the underperformance of financial-sector bonds during our sample period is largely attributable to their high relative volatility.

show abstract

Section: Sample and Datamentioning

confidence: 99%