Proceedings of the 3rd International Conference on Economic Development and Business Culture (ICEDBC 2023)

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The Impact of Different Bond Types on Mean-Reversion Strategies for Bond Portfolio Management

Authors
Yuning Zhang1, *
1School of Mathematics, University of Edinburgh, Edinburgh, EH8 9YL, UK
*Corresponding author. Email: S2162788@ed.ac.uk
Corresponding Author
Yuning Zhang
Available Online 26 September 2023.
DOI
10.2991/978-94-6463-246-0_16How to use a DOI?
Keywords
Mean-reversion Strategy; Bonds; Sharpe Ratio
Abstract

The research aims to investigate the mean-reversion strategy for three types of bonds: government bonds, corporate bonds, and municipal bonds. The analysis is based on 10 different bonds for each type. The descriptive statistical analysis includes computing the mean, standard deviation, skewness, kurtosis, and Sharpe ratio of the portfolio returns. Moreover, the inferential statistical analysis involves computing the high-water mark, drawdown, and maximum drawdown of the portfolio returns. The results indicate that the traditional mean-reversion strategy is more effective for government bonds than corporate and municipal bonds. Furthermore, the strategy has a negative Sharpe ratio, suggesting that the risk-adjusted returns are not favorable. The high drawdown and maximum drawdown suggest that the strategy can result in significant losses for investors. Therefore, investors should exercise caution when using the traditional mean-reversion strategy for bonds.

Copyright
© 2024 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Volume Title
Proceedings of the 3rd International Conference on Economic Development and Business Culture (ICEDBC 2023)
Series
Advances in Economics, Business and Management Research
Publication Date
26 September 2023
ISBN
10.2991/978-94-6463-246-0_16
ISSN
2352-5428
DOI
10.2991/978-94-6463-246-0_16How to use a DOI?
Copyright
© 2024 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Cite this article

risenwbib
TY  - CONF
AU  - Yuning Zhang
PY  - 2023
DA  - 2023/09/26
TI  - The Impact of Different Bond Types on Mean-Reversion Strategies for Bond Portfolio Management
BT  - Proceedings of the 3rd International Conference on Economic Development and Business Culture (ICEDBC 2023)
PB  - Atlantis Press
SP  - 138
EP  - 150
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-246-0_16
DO  - 10.2991/978-94-6463-246-0_16
ID  - Zhang2023
ER  -