In this paper we present an analysis of diversification strategies on portfolios of European corporate bonds. From the perspective of a US-based investor we study whether mean–variance diversification strategies change as a result of the introduction of the European Economic and Monetary Union (EMU). Using a comprehensive and unique data set of European corporate bonds we show that country factors are more important than industry factors to describe the cross-section of European corporate bonds. In particular we find that in the Post-EMU period country factors remain important.
Pieterse-Bloem, M., & Mahieu, R. J. (2013). Factor decomposition and diversification in European corporate bond markets. Journal of International Money and Finance, 32, 194-213. https://doi.org/10.1016/j.jimonfin.2012.04.005