RT Journal Article
SR Electronic
T1 Crisis-Robust Bond Portfolios
JF The Journal of Fixed Income
FD Institutional Investor Journals
SP 57
OP 70
DO 10.3905/jfi.2008.712350
VO 18
IS 2
A1 Marie Brière
A1 Ariane Szafarz
YR 2008
UL https://pm-research.com/content/18/2/57.abstract
AB This article defines a “crisis robust” portfolio that satisfies the minimal crisis-to-quiet time volatility ratio. This type of portfolio is less demanding for the investor than a regime-wise asset allocation. Although general, the concept of a crisis-robust portfolio is especially pertinent when applied to the bond market, which offers a flight-to-quality trade-off during crises (all volatilities increase but most correlations decrease). Using three categories of bonds (sovereign, investment-grade corporate, and high-yield corporate) in the U.S. and Eurozone for the 1998–2007 period, we demonstrate the composition of crisis-robust portfolios and discuss the stabilizing role played by low-quality bonds during crises.TOPICS: Fixed-income portfolio management, financial crises and financial market history, volatility measures, developed markets [US, Europe]