RT Journal Article
SR Electronic
T1 Which Risks Have Been Best Rewarded?
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 53
OP 57
DO 10.3905/jpm.2004.319930
VO 30
IS 2
A1 Antti Ilmanen
A1 Rory Byrne
A1 Heinz Gunasekera
A1 Robert Minikin
YR 2004
UL https://pm-research.com/content/30/2/53.abstract
AB An empirical study examines the consistency of rewards for bearing various types of risks in U.S. asset markets between 1985 and early 2002. Bearing duration risk and equity market risk was amply rewarded, while bearing long-dated credit risk buying credit-risky bonds versus governments realized puny average profits. Bearing short-dated credit risk gave the most consistent profits of all static overweight strategies, with an information ratio near one. Wide break-even spread cushions may be one explanation for the superior reward for risk at short maturities. More fundamentally, market segmentation seems to be the main explanation, because the most consistent profit opportunities involve switching from Treasuries to top-rated non-government bonds.