The explanatory power of size, value, profitability, and investment has been extensively studied for equity markets. Yet, the relevance of these factors in global credit markets is less explored, although equities and bonds should be related according to structural credit risk models. In this article, the authors investigate the impact of the four Fama–French factors in the US and European credit space. Although all factors exhibit economically and statistically significant excess returns in the US high-yield market, the authors find mixed evidence for US and European investment-grade markets. Nevertheless, they show that investable multifactor portfolios outperform the corresponding corporate bond benchmarks on a risk-adjusted basis. Finally, their results highlight the impact of company-level characteristics on the joint return dynamics of equities and corporate bonds.

We analyze green and conventional bonds during regular market periods and within times of extreme volatility, the COVID-19 pandemic. We find a negative premium (greenium) of 1.6 bp before the outbreak of COVID-19, but during the times of extreme market stress, this greenium widens to 3.5 bp as our results show a significant outperformance of green bonds. The results indicate that green bonds are more resilient during risk-off periods than non-green bonds. In addition, the greenium effect is moderated by the issuer's country environmental performance as the greenium is more pronounced for issuers from non-green countries prior to COVID-19. We do not find differences between green and non-green countries since COVID-19.