Strategies · Library · Fixed income
§5.9Factor
Low-risk factor
Favour bonds with high credit quality and short maturity, because lower-risk bonds have tended to earn more per unit of risk than riskier ones.
Open in the builderAs a long-only proxy; see how ARCANE uses it.
- Asset class
- Fixed income
- Held for
- Months
- Data
- ARCANE has part of the data
- Symphony
- Builds as a long-only proxy
The rule
- Signal
- Credit rating and maturity per bond
- Entry and exit
- Buy the shortest-maturity tenth among investment grade (or high yield); rebalance monthly.
- Sizing
- Equal across selected bonds
How it fails
- Rate rises hurt even short bonds
- Lower yield
- Crowded ETF flows
Data it needs
- daily adjusted closes
- additional inputs ARCANE lacks
No bond-level ratings; ETFs such as SHY, VCSH, SPSB approximate it.
How ARCANE uses it
Supports Calls that favour short-term high-grade credit in stress (paper only).
Builds as a long-only proxy. Hold short-maturity Treasury or investment-grade ETFs.
Filed under the factor card
Own companies that are small, cheap, profitable and invest conservatively, against their opposites, and rebalance once a year.
A paper plan from this card holds 63 to 365 days, stops at 2× the expected move and uses at most 75% of your risk budget. The card
Source: Kakushadze and Serur (2018), 151 Trading Strategies, §5.9, p. 74 of the SSRN version. Described in our words. Factor is ARCANE’s filing, not the book’s.