Boosting Momentum

Abstract

Machine learning techniques have gained popularity in recent years, but only to a limited extent in fixed income research. We do some new work in the application of Boosted Regression Trees to the equity momentum factor in the corporate bond market. We report significant performance gains to investors using machine learning-driven forecasts, roughly doubling the alpha and information ratio to better known equity momentum strategies. In addition to past equity returns, we include size and liquidity of stocks and bonds into our model framework.