%0 Journal Article %A Mathieu L’Hoir %A Mustafa Boulhabel %T A Bond-Picking Model for Corporate Bond Allocation %D 2010 %R 10.3905/jpm.2010.36.3.131 %J The Journal of Portfolio Management %P 131-139 %V 36 %N 3 %X An active investment process in corporate bonds requires an approach that explicitly takes into account the diversification benefits that can be derived from a combination of alpha signals.The main challenge is to find indicators that fulfill at least two conditions.First, each individual alpha signal should achieve consistent performance on a univariate basis, and second, each should exhibit relatively low performance correlation because low correlation is a necessary condition for generating a diversification effect.L’Hoir and Boulhabel show that the combination of three types of signals—valuation signals, equity return signals, and earning momentum signals—fulfills the aforementioned conditions and delivers consistent and stable risk-adjusted returns. The authors present the results of their study for the U.K. corporate bond market.TOPICS: Manager selection, options %U https://jpm.pm-research.com/content/iijpormgmt/36/3/131.full.pdf