TY - JOUR T1 - Original Issue High-Yield Bonds JF - The Journal of Portfolio Management SP - 96 LP - 101 DO - 10.3905/jpm.2007.698038 VL - 34 IS - 1 AU - Martin S Fridson AU - Karen Sterling Y1 - 2007/10/31 UR - https://pm-research.com/content/34/1/96.abstract N2 - In the past full market cycle, original issue high-yield bonds delivered no material total return premium over default risk-free Treasuries. This represents a bona fide market inefficiency that proved exploitable by one group engaged in actual market transactions; the corporate sellers of new issues escaped paying a default risk premium. Among the five complementary rather than mutually exclusive factors identified here that may explain this anomaly are: unawareness of the underperformance of the OI segment; a focus on security selection; a lottery ticket effect; and the mirage of remedy based on yield. The discussion gets to the heart of the premise on which the high-yield investment concept was marketed at the dawn of its modern era in the late 1970s.TOPICS: Risk management, fixed-income portfolio management, portfolio construction ER -