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Predictions of corporate bond excess returns

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journal contribution
posted on 12.05.2022, 04:15 by Hai LinHai Lin, J Wang, C Wu
In this paper, we investigate the predictability of corporate bond excess returns using a comprehensive data sample for the period from January 1973 to December 2010. We find that corporate bond returns are more predictable than stock returns, and the predictability tends to be higher for low-grade bonds and short-maturity bonds. A forward rate factor captures substantial variations in expected bond excess returns. Furthermore, liquidity factors and a bond's credit spread have predictive power on corporate bond excess returns. Combining these variables with traditional predictors significantly improves the performance of the predictive model for corporate bond returns.

History

Preferred citation

Lin, H., Wang, J. & Wu, C. (2014). Predictions of corporate bond excess returns. Journal of Financial Markets, 21, 123-152. https://doi.org/10.1016/j.finmar.2014.08.003

Journal title

Journal of Financial Markets

Volume

21

Publication date

01/11/2014

Pagination

123-152

Publisher

Elsevier BV

Publication status

Published

Contribution type

Article

Online publication date

28/08/2014

ISSN

1386-4181

eISSN

1878-576X

Language

en