@article {Edelstein30, author = {Ariel Edelstein and Bruce D. Phelps}, title = {The Aftermath of Investment-Grade Distress}, volume = {39}, number = {1}, pages = {30--45}, year = {2012}, doi = {10.3905/jpm.2012.39.1.030}, publisher = {Institutional Investor Journals Umbrella}, abstract = {What should one do with investment-grade bonds that begin to trade at distressed levels? This is when a portfolio manager is compelled to make the critical decision: Sell, hold, or buy? To help managers make an objective decision, the authors carefully examine the historical evidence regarding the performance of distressed investment-grade (DIG) bonds after a distress month. The historical record shows that DIG bonds have been very strong performers. On average, the 901 DIG bonds from January 1990 to July 2011 returned 51.6\% over the 24 months following their distress month. They outperformed their peers by 30.1\% and earned 39.8\% more than comparable Treasury bonds. After adjusting for DIG bonds{\textquoteright} ex ante higher expected excess return volatility, the authors find that DIG bonds generated approximately 81 bps a month of additional return compared with an equal risk investment in the IG Corporate Index.TOPICS: Fixed-income portfolio management, risk management, performance measurement}, issn = {0095-4918}, URL = {https://jpm.pm-research.com/content/39/1/30}, eprint = {https://jpm.pm-research.com/content/39/1/30.full.pdf}, journal = {The Journal of Portfolio Management} }