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Asset ManagementA Systematic Approach to Factor Investing$
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Andrew Ang

Print publication date: 2014

Print ISBN-13: 9780199959327

Published to Oxford Scholarship Online: August 2014

DOI: 10.1093/acprof:oso/9780199959327.001.0001

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(p.271) Chapter 9 Bonds
Asset Management

Andrew Ang

Oxford University Press

The level factor, which shifts the yields of all bonds, is the crucial factor in fixed income investments. The level factor is affected by risks associated with economic growth, inflation, and monetary policy. Corporate bonds do not just reflect credit risk; as predicted by theory, volatility risk is an important factor and corporate bond returns correlate highly with equity returns. Illiquidity risk is also an important factor in bond returns.

Keywords:   level factor, duration, Federal Reserve, monetary policy, quantitative easing, clientele model, term spread, credit spread puzzle, bond risk premium, credit risk premium, illiquidity, default risk

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