LinTaoWangWu2020JFRM.pdf (1.38 MB)
Credit Spreads, Business Conditions, and Expected Corporate Bond Returns
journal contribution
posted on 2022-04-26, 21:25 authored by Hai LinHai Lin, Xinyuan Tao, Junbo Wang, Chunchi WuUsing an aggregate credit spread index, we find that it has substantial predictive power for corporate bond returns over short and long horizons. The return predictability is economically and statistically significant and robust to various controls. The credit spread index and its components have more predictive power for bond returns than conventional default and term spreads. When decomposing the credit spread index into investment- and speculative-grade components, the latter has more predictive power for future bond returns. The source of the index’s predictive power is from its ability to forecast future economic conditions.
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Lin, H., Tao, X., Wang, J. & Wu, C. (2020). Credit Spreads, Business Conditions, and Expected Corporate Bond Returns. Journal of Risk and Financial Management, 13(2), 20-20. https://doi.org/10.3390/jrfm13020020Publisher DOI
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Journal of Risk and Financial ManagementVolume
13Issue
2Publication date
2020-01-21Pagination
20-20Publisher
MDPI AGPublication status
Published onlineOnline publication date
2020-01-21ISSN
1911-8066eISSN
1911-8074Language
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