Analysing and Decomposing the Sources of Added-Value of Corporate Bonds Within Institutional Investors’ Portfolios

Lionel Martellini, Vincent Milhau: The present publication is drawn from the Rothschild & Cie research chair on “The Case for Inflation-Linked Corporate Bonds: Issuers’ and Investors’ Perspectives” at EDHEC-Risk Institute.

Author(s):

Lionel Martellini

Professor of finance at EDHEC Business School and scientific director of EDHEC-Risk Institute.

Vincent Milhau

Deputy scientific director of EDHEC-Risk Institute.

The purpose of this research chair is to support research undertaken at EDHEC-Risk on the benefits of inflation-linked bonds from the investors’ perspective as well as from the issuers’ perspective. The chair also focuses on comparing and contrasting investors’ and issuers’ perceptions of inflation-linked bonds. The current paper, by Lionel Martellini, Scientific Director of EDHEC-Risk Institute, and Vincent Milhau, Deputy Scientific Director of EDHEC-Risk Institute, provides a formal analysis of the benefits of corporate bonds in investors’ portfolios,  distinguishing between the impact of introducing them in performance-seeking portfolios and the impact of introducing them in liabilityhedging portfolios. The authors show that investor welfare can be improved by the design of performanceseeking portfolios with improved liabilityhedging properties, or conversely by the design of liability-hedging portfolios with improved performance properties.

Type: EDHEC Publication
Date: le 16/09/2013
Research Cluster : Finance

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