Equity-Inspired Credit Risk Factors Complement Traditional Ones

We measure the benefits of using equity-inspired credit risk factors to explain risk in corporate bond markets. In addition to traditional credit factors—sector, rating, and duration—we show that the inclusion of carry, value, momentum, volatility, and liquidity risk factors, all constructed using only credit market data, significantly enhances our ability to measure systematic risk in corporate bond returns. Equity-inspired credit risk factors complement traditional ones: they account for about 50% of model performance. Our results are similar across investment-grade and high-yield markets and across US and European bond markets.

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Publication Details

Journal
The Journal of Portfolio Management
Published
2026-02-18
DOI
https://doi.org/10.3905/jpm.2026.1.830
Primary Topic
Credit Risk and Financial Regulations
Type
article
Field-Weighted Citation Impact
0.00
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article

Equity-Inspired Credit Risk Factors Complement Traditional Ones

Simon Polbennikov, Hugues Langlois, Dominique Toublan, Jay Hyman
The Journal of Portfolio Management
Credit Risk and Financial Regulations
article

Equity-Inspired Credit Risk Factors Complement Traditional Ones

Simon Polbennikov, Hugues Langlois, Dominique Toublan, Jay Hyman
article en

Abstract

We measure the benefits of using equity-inspired credit risk factors to explain risk in corporate bond markets. In addition to traditional credit factors—sector, rating, and duration—we show that the inclusion of carry, value, momentum, volatility, and liquidity risk factors, all constructed using only credit market data, significantly enhances our ability to measure systematic risk in corporate bond returns. Equity-inspired credit risk factors complement traditional ones: they account for about 50% of model performance. Our results are similar across investment-grade and high-yield markets and across US and European bond markets.

The Journal of Portfolio Management
Barclays (United Kingdom) (GB)
Reduced inequalities
Openalex Percentile: Top 53%
Credit Risk and Financial Regulations
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