Most of the "genius" ways we predict the bond market are actually just math tricks that don't really exist in the real world.
April 10, 2026
Original Paper
The Corporate Bond Factor Replication Crisis
SSRN · 6088966
The Takeaway
Financial factors are the math signals used to predict investment returns. This study found that when you fix basic data errors, most of the famous signals used to trade corporate bonds completely vanish, suggesting the industry is built on a foundation of bad math.
From the 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 do