Work

The Corporate Bond Factor Replication Crisis

Year: 2026

Type: preprint

Abstract: Corporate bond factor research faces a replication crisis. The crisis stems from two sources that inflate reported factor premia: transaction prices whose measurement error enters both sorting signals and return denominators, creating a correlated errors-in-variables bias, and asymmetric ex-post return filtering that embeds future information into factor construction. Applying our framework to a 'factor zoo' of 108 signals across nine thematic clusters, we show that the majority of previously documented factors do not produce statistically significant bond CAPM alphas after correction. We provide an open source framework via Open Bond Asset Pricing, including error-corrected TRACE data, bias corrected factors, and software for reproducible research.

Source: arXiv (Cornell University)

DOI: 10.48550/arxiv.2604.07880

Authors: Dickerson, Alexander, Robotti, Cesare, Rossetti, Giulio

Institutions: University of Technology Sydney, The University of Sydney, The University of Melbourne, University of Toronto, Aarhus University, UNSW Sydney, Università della Svizzera italiana, University of Warwick

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W7152957134

Cites:

Cited by:

Related to: