Factors in Swiss franc corporate bond returns

This paper examines the cross-sectional drivers of credit returns for Swiss franc corporate bonds in a comprehensive sample including trade-based prices and effective bid-ask spreads from 2007 to 2022. Characteristics for momentum, carry, value, and defensive explain a significant part of the variation in future credit returns across companies. Value is based on a market-based credit risk model. Except for carry, the characteristics also deliver positive risk-adjusted returns. These results are robust for trade-based prices and different subsamples but transaction costs significantly reduce the profitability of the characteristics. After transaction costs, value and a combination of the characteristics remain profitable and continue to deliver significant risk-adjusted returns.