Forthcoming Issue
Volume 24, No. 3, Third Quarter 2026
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Article
Advances in Corporate Credit Modeling: From Valuation to Portfolio Theory
Corporate bond markets have grown into a core component of global financial systems and institutional portfolios, yet the academic literature has progressed unevenly across pricing, empirical return behavior, and portfolio construction. This paper provides a comprehensive survey of corporate bond research, spanning structural, reduced-form, and hybrid pricing models; empirical evidence on default, recovery, liquidity, and return predictability; and portfolio-oriented approaches used in both academic and practitioner settings. We identify a central gap in the literature: while pricing theory operates largely under the risk-neutral measure and empirical studies document return behavior under the physical measure, these strands have not been fully integrated into a unified portfolio framework. In the final part of the paper, we show how the Equivalent Expectation Measures and multiverse EEMs provide analytical tools for deriving finite-horizon expected returns and variance–covariance matrices of corporate bond returns under the physical measure, enabling direct application of classical mean–variance analysis to construct efficient frontiers and ex-ante Sharpe-ratio-maximizing portfolios for risky corporate bonds.
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Article
Estimating Industry Betas via Machine Learning: Promises and Pitfalls of Multi-Output Predictions
This study examines the predictive performance of multi-output machine learning models in estimating industry betas. Multi-output predictions improve forecast accuracy by identifying cross- sectional interdependencies between industries that single-output approaches systematically overlook. Two portfolio applications demonstrate the economic value of these improvements: constructing market-neutral anomaly strategies and optimizing minimum variance portfolios. Our results demonstrate that multi-output estimates facilitate a more detailed modelling of systematic risk. This has a meaningful impact on investment decisions, leading to more effective hedging strategies, improved risk management, and greater alignment with investor preferences.
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Survey & Crossover
Biblically Responsible Investing: Methodology and Evidence
Does Biblically Responsible Investing (BRI) impose a financial penalty? Analyzing BRI exchange-traded funds (ETF) against conventional benchmarks using academic literature and market data from 2014–2025, we find no systematic underperformance. Performance varies across funds: the Inspire Small/Mid Cap ETF (ISMD) demonstrates superior risk-adjusted metrics (Sharpe 0.65, alpha 2.19), while others lag. However, fees warrant scrutiny—BIBL (0.39%) and ISMD (0.57%) exceed index fund costs, though strong performance has largely justified them. RISN’s 0.79% fee, given only modest returns, raises concerns. With 92% of over 30,000 global companies passing biblical screens, diversification concerns are unfounded. BRI enables faith alignment without systematically sacrificing returns.