The value effect refers to the tendency of stocks with lower valuation ratios to earn above average returns over the long run. This effect—also referred to as the “value premium”—is one of the most well studied and evidenced market factors in equities. However, when it comes to fixed income, there hasn’t been a widely accepted definition of the value factor.
In “Fixed-Income Value Factor,” a recent research study published in the Journal of Fixed Income, FTSE Russell’s Shawn Shen, Arom Pathammavong and Alex Chen seek to define the value factor in fixed income, and study its source and behavior. The paper tests the bond value factor’s relative performance, and then discusses practical implementation considerations.
Visit the Journal of Fixed Income website to download the report.
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